Free RMA Practice Questions

Question 1

Elena, 66, says she could tolerate a 30% portfolio decline without selling. Her pension covers housing and basic food, but her portfolio must fund essential insurance premiums and care for a dependent sibling. A stress test shows that a 15% decline would leave those commitments unfunded; additional work and spending cuts are not feasible. What should determine the risk budget for these commitments?

Accepted Answer

Her limited financial capacity to absorb losses without compromising these required payments, despite her stated willingness.

Answer

Her willingness to endure a 30% decline, confirmed through a current risk-tolerance questionnaire.

Answer

Her portfolio's long-term expected return, provided it exceeds the annual withdrawal rate over the planning horizon.

Answer

Her age-based allocation, provided its equity weight resembles that of other recently retired investors.

Question 2

Marcus, 67, is eligible for his full Social Security retirement benefit. His wife, 63, has a much smaller earnings record. They can fund living costs without claiming his benefit and are especially concerned about her income if he dies first. In comparing a claim now with a claim at 70, how should his delayed retirement credits be treated?

Accepted Answer

They can increase her survivor benefit, but not her maximum spousal benefit while he is alive.

Answer

They increase her maximum spousal benefit but are excluded when her eventual survivor benefit is calculated.

Answer

They increase both her maximum spousal benefit and her survivor benefit by the same percentage.

Answer

They increase his retirement benefit but do not affect either benefit payable on her behalf.

Question 3

'I can spend the dividends, but selling a single share means living off my capital,' a recently retired client says. His diversified portfolio can support the agreed spending plan, but its cash distributions are below his spending needs. He proposes replacing it with higher-yielding, more concentrated holdings. Which response addresses his concern without unnecessarily changing his risk exposure?

Accepted Answer

Explain total-return spending and fund the agreed withdrawals with distributions and planned share sales.

Answer

Adopt the higher-yielding portfolio and use its distribution rate as the sustainable annual spending rate.

Answer

Replace equities with short-term deposits and postpone spending until interest alone covers the withdrawal target.

Answer

Keep the current portfolio but cap withdrawals at its cash distributions, even when the plan supports more spending.

Question 4

A household balance sheet adds the present value of pension benefits to financial assets. It then values retirement liabilities after subtracting those same pension payments from spending. All values use a consistent after-tax basis, valuation date, and nominal discount-rate convention. The resulting funding surplus looks unusually large. Which finding explains the overstatement?

Accepted Answer

The pension increases assets and also reduces liabilities, so its economic value is counted twice.

Answer

Pension benefits cannot be retirement resources unless the plan offers a lump-sum election.

Answer

The liability discount rate should equal expected equity returns rather than reflect the obligations being funded.

Answer

After-tax pension payments must first be grossed up to make their value comparable with the other after-tax resources.

Question 5

Jamal, 68, retires on June 30, 2026, when his coverage based on current employment also ends. He had continuous qualifying employer coverage since turning 65 and had deferred Medicare Part B. He elects 18 months of COBRA and asks whether he can wait until it expires to enroll. What enrollment guidance is accurate?

Accepted Answer

Enroll in Part B promptly; COBRA does not extend the employment-based eight-month special enrollment period.

Answer

COBRA preserves his enrollment protection until eight months after the continuation coverage ends.

Answer

Use the October 15-December 7 annual Medicare election period to establish his first Part B coverage.

Answer

Wait for the January-March general enrollment period because retirement ended his special enrollment eligibility.

Question 6

To fund their first full retirement year, a couple, both 67, budget $70,000 for recurring spending and $18,000 for a roof replacement. Their pension and Social Security provide $60,000 after tax. They will also use $10,000 of bank cash. The remaining need must come from a wholly pretax IRA, and every dollar distributed incurs a combined 25% income tax; assume no other tax or benefit effects. What gross IRA distribution completes the funding?

Accepted Answer

$24,000

Answer

$18,000

Answer

$22,500

Answer

$37,333

Question 7

A planner improves modeled lifetime after-tax retirement income by coordinating asset location, withdrawal sequencing, and partial annuitization. The analysis attributes none of the improvement to security selection or outperformance of an investment benchmark. In Morningstar's retirement-planning framework, what does this improvement represent?

Accepted Answer

Retirement gamma from integrating planning decisions to improve retirement-income outcomes.

Answer

Investment alpha from earning returns above an appropriate risk-adjusted securities benchmark.

Answer

Portfolio beta from changing sensitivity to movements in the broad equity market.

Answer

A higher Sharpe ratio from earning more investment return per unit of portfolio volatility.

Question 8

A 76-year-old unmarried retiree's only traditional IRA was worth $592,500 on December 31, 2025, and $568,800 in October 2026. The applicable Uniform Lifetime factor is 23.7. An $8,000 qualified charitable distribution from this IRA is his only 2026 distribution so far. He now wants to complete his required minimum distribution and convert an additional $40,000 to a Roth IRA. Which instruction is correct?

Accepted Answer

Distribute $17,000 to finish the RMD, then convert the additional $40,000.

Answer

Distribute $25,000 before converting $40,000, because the charitable transfer does not satisfy the RMD.

Answer

Distribute $16,000 before converting $40,000, using the current account value and crediting the charitable transfer.

Answer

Use a $17,000 Roth conversion to satisfy the remaining RMD, then convert another $40,000.

Question 9

Both proposals show a 90% Monte Carlo success rate over 30 years. Proposal A counts a path as successful only if all inflation-adjusted essential and travel spending is paid. Proposal B counts it as successful if essential spending is paid, allowing travel spending to be eliminated. The client values both goals and asks whether the plans are equally resilient. What can be concluded from the two percentages?

Accepted Answer

The percentages are not directly comparable because the proposals use different definitions of success.

Answer

They imply the same likelihood of maintaining the client's full spending plan throughout retirement.

Answer

Each proposal is expected to pay 90% of the client's requested spending in every retirement year.

Answer

Proposal A's result establishes that essential expenses are guaranteed, with uncertainty confined to travel spending.

Question 10

An advisor matches a Treasury portfolio's present value and duration to a retiree's fixed nominal spending liabilities. The design assumes small, parallel yield-curve shifts. The curve subsequently steepens as short-term yields fall and long-term yields rise; spending obligations are unchanged. Why can a funding shortfall emerge despite the initial duration match?

Accepted Answer

A single duration match does not necessarily hedge different yield changes at different maturities.

Answer

Coupon payments are excluded when calculating duration; only principal is matched.

Answer

The asset duration must exceed the liability duration to protect against every possible increase in yields.

Answer

Matching present values eliminates reinvestment risk, leaving only the choice of reinvestment date to explain the shortfall.

Free RMA Practice Questions

Domain 1: The Retirement Opportunity 18% of exam

Question 1

Question 2

Domain 2: The Retirement Client 41% of exam

Question 3

Question 4

Question 5

Question 6

Domain 3: Retirement Planning Technical Design 41% of exam

Question 7

Question 8

Question 9

Question 10

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