Posts by Dan Madden, CFP®
Roth IRA Withdrawal Taxation
A client withdraws $30,000 from her Roth IRA in 2026. The account consists of $20,000 in contributions and $10,000 in earnings. She is age 45 and does not meet any exception to the early withdrawal penalty. How will the $30,000 distribution be treated for tax purposes? Entire amount is tax-free and penalty-free Contributions are tax-free;…
Read MoreSolving for Annual Equivalent Rate
Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: I am confused as to how to get the correct answer for number 4 Jackie invests her bonus at the beginning of this calendar year. If she earns 7% compounded monthly, what is the annual equivalent rate? Round your answer to two decimal places. I…
Read MoreEarnings Test Calculation
A CFP® professional is evaluating a client’s life insurance needs using the capital needs analysis approach. Which of the following would be classified as a capital need rather than an income need? Monthly living expenses for surviving family members Future college education costs for children Mortgage payoff at death Replacement of the client’s salary CLICK…
Read MoreUnderstanding the Relationship Between Coupon Rates and Duration
Course: Investment PlanningLesson 9: Fixed Income Securities Student Question: There is a question regarding duration that I continue to struggle with. Which of the following are true: 1-Lower coupon bonds are more sensitive to interest rates than high coupon bonds. 2-There is inverse relationship between bond prices and change in interest rates. 3-There is a positive relationship between coupon rates and duration. Can…
Read MoreEarnings Test Calculation
A client turns age 73 in 2026 and must begin taking required minimum distributions (RMDs) from her traditional IRA. Which of the following statements is CORRECT regarding her first RMD? It must be taken by December 31, 2026 It may be delayed until April 1, 2027 It is not required until age 75 It can…
Read MoreDependent Care Assistance Plan
Course: Retirement PlanningLesson 9: Building Retirement Wealth by Maximizing Fringe Benefits Student Question: Is a Dependent Care Assistance Plan (DCAP) funded by a Flexible Spending Account the same thing as a Dependent Care FSA? If not, could you provide some additional info as to how the two would work together (could an individual utilize both…
Read MoreEarnings Test Calculation
An employee pays premiums for an individual disability income insurance policy with after-tax dollars. The employer does not contribute to the policy. If the employee becomes disabled and begins receiving benefits, how will the benefits be taxed? Fully taxable as ordinary income Partially taxable based on employer contributions Tax-free Subject to capital gains tax rates…
Read MoreInternal Rate of Return Calculation
Course: Fundamentals of Financial Planning Lesson 5b: Using the HP 10bII Calculator Student Question: In Example 2, the solution given has 6 years (including CF0) instead of 5. I believe the first year of Carl’s coin purchase should be CF0, but the fifth year – which includes a purchase and a sale – should be CF4.…
Read MoreEarnings Test Calculation
In 2026, a married couple filing jointly has taxable income of $90,000, which includes $10,000 of long-term capital gains. What federal tax rate applies to the $10,000 of long-term capital gains? 0% 15% 20% Ordinary income tax rates CLICK TO REVEAL ANSWER Expand A is the answer For 2026, the 0% long-term capital gains threshold…
Read MoreLate Medicare Enrollment Penalty
Course: Insurance PlanningLesson 10: Fundamentals of Social Security and Medicare Student Question: Hi, Under the ‘late enrollment penalty’ link, there is a example given by Medicare. It states that there is a 20% penalty because 30 months had lapsed, or at least 2 12-month periods post initial enrollment had lapsed. The date given for initial…
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