Retirement Income Planning Flashcards
What are the main sources of retirement income?
Social Security, pensions, retirement accounts (IRAs/401(k)s), taxable brokerage accounts, annuities, and part-time work.
What is a pension?
A defined benefit plan that pays a guaranteed income for life, typically from a government or corporate employer.
What is annuity income?
Regular payments from an annuity contract, often used to cover fixed expenses in retirement.
What are non-retirement account sources of income?
Rental income, business income, and passive income from investments in taxable accounts.
What is the 4% rule?
A guideline suggesting you can withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation.
What is a bucket strategy?
Segmenting assets into short-, medium-, and long-term buckets to match cash flow needs and manage risk.
What is the guardrails withdrawal strategy?
Adjusts withdrawals up or down based on portfolio performance to reduce sequence of returns risk.
What is dynamic withdrawal planning?
Changing withdrawal rates based on market returns, spending needs, and other factors year to year.
Why might someone use a ‘floor and upside’ strategy?
To guarantee basic expenses (floor) with Social Security or annuities, and invest the rest for growth (upside).
When do RMDs begin?
Age 73 (increased to 75 in 2033 due to SECURE Act 2.0).
Which accounts are subject to RMDs?
Traditional IRAs, 401(k)s, SEP/SIMPLE IRAs—but not Roth IRAs (Roth 401(k)s are unless rolled over).
What is the penalty for missing an RMD?
25% of the amount not withdrawn (can be reduced to 10% if corrected quickly).
How are RMDs calculated?
Account balance on Dec 31 ÷ IRS life expectancy factor for your age.
Can you satisfy RMDs with Qualified Charitable Distributions (QCDs)?
Yes—QCDs can count toward your RMD and reduce taxable income.
What is the earliest age you can claim Social Security retirement benefits?
Age 62—but benefits are permanently reduced.
What is Full Retirement Age (FRA)?
The age at which you can receive 100% of your benefit—currently 67 for most people.
How much more do you receive if you delay benefits to age 70?
An 8% increase per year after FRA, up to 124% of your FRA benefit at age 70.
Should you always delay Social Security?
Not always—depends on health, income needs, spousal planning, and longevity expectations.
How are spousal benefits calculated?
Up to 50% of the higher earner’s FRA benefit—reduced if taken early.
Are Social Security benefits taxable?
Yes, up to 85% of benefits may be taxable depending on income.
What is the tax impact of RMDs?
They count as ordinary income and may push you into a higher bracket.
What is a Roth conversion ladder?
Converting traditional funds to Roth slowly over time to reduce future RMDs and control taxable income.
What are tax-efficient withdrawal strategies?
Withdrawing from taxable accounts first, then tax-deferred, then Roth last (general rule, not universal).
What is IRMAA?
Income-Related Monthly Adjustment Amount—higher Medicare premiums for high-income retirees.
