Certified Financial Planner Flashcards
7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Certified Financial Planner flashcards as text
A client aged 58 wants to withdraw from her 401(k) to pay medical bills. Which exception allows penalty-free early withdrawal?
Answer: Unreimbursed medical expenses exceeding 7.5% of AGI
Unreimbursed medical expenses exceeding 7.5% of AGI qualify for the 10% early withdrawal penalty exception under IRC Section 72(t).
Under the CFP Board's Code of Ethics, which duty requires a CFP professional to act in the client's best interest at all times?
Answer: Fiduciary duty
The fiduciary duty requires CFP professionals to place the client's interests above their own in all financial planning relationships.
Which Social Security strategy allows a married couple to maximize lifetime benefits when one spouse has significantly higher earnings?
Answer: Lower-earning spouse claims early while higher earner delays to age 70
Having the lower earner claim early provides income while the higher earner's delayed credits grow 8% per year, maximizing the survivor benefit.
A client has a $500,000 portfolio with a standard deviation of 12% and an expected return of 8%. What does a coefficient of variation of 1.5 indicate?
Answer: 1.5 units of risk per unit of expected return
The coefficient of variation (standard deviation ÷ mean return) measures risk per unit of return, so 1.5 means 1.5 units of risk for each unit of expected return.
Which type of annuity provides the highest initial payout but leaves a surviving spouse with no continued income?
Answer: Life only (straight life) annuity
A life-only annuity pays the highest monthly benefit but stops at the annuitant's death, providing no income to a surviving spouse.
In estate planning, what is the primary advantage of a Charitable Remainder Trust (CRT) for a client with highly appreciated stock?
Answer: Avoids immediate capital gains tax on the donated asset and provides an income stream
A CRT allows the donor to transfer appreciated assets, avoid immediate capital gains tax, receive an income stream, and take a partial charitable deduction.
Which disability income insurance definition of disability is most favorable to the insured?
Answer: Own-occupation definition
The own-occupation definition pays benefits if the insured cannot perform the duties of their specific occupation, even if they can work in another field.