Investment Strategies for Retirement Flashcards
7 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Strategies for Retirement flashcards as text
A client is evaluating a deferred income annuity (DIA) that begins payments at age 85. The PRIMARY benefit of this product is:
Answer: Inexpensive longevity insurance with a low premium
A DIA purchased at retirement for a distant start date costs relatively little but ensures income if the client outlives their portfolio, making it an efficient longevity hedge.
Which statement BEST describes the role of rebalancing in a retirement portfolio?
Answer: Rebalancing maintains the intended risk level as markets shift allocations
Over time, strong asset classes grow to dominate the portfolio, raising risk beyond the target; rebalancing restores the original risk exposure regardless of return impact.
A retiree has a $1,000,000 portfolio and wants to use the 4% rule. How much can she withdraw in year one, and what happens to that amount in subsequent years under the original Bengen framework?
Answer: $40,000 in year one; amount is adjusted for inflation each year
Bengen's original research calls for withdrawing 4% of the initial portfolio ($40,000) and increasing that dollar amount by inflation each year to maintain purchasing power.
What is the primary difference between a fixed annuity and a variable annuity in retirement planning?
Answer: Fixed annuities credit a declared interest rate; variable annuities invest in subaccounts with market-linked returns
Fixed annuities credit a declared rate to the accumulation value, while variable annuities allocate premiums to investment subaccounts whose returns fluctuate with market performance.
A 65-year-old client holds 40% of his retirement portfolio in his former employer's stock. A CRPC practitioner would FIRST recommend:
Answer: Evaluating the tax consequences of selling before recommending a diversification plan
Before recommending any action on a concentrated position, the advisor must assess embedded capital gains, holding period, and tax basis to develop a tax-efficient diversification strategy.
Which bond characteristic makes it MOST suitable for liability-matching in a retirement income portfolio?
Answer: Maturity date that coincides with a known future spending need
Liability matching pairs bonds with known maturity dates to specific future cash flow needs, ensuring funds are available when required regardless of interest rate changes.
A client asks whether to choose a single-life or joint-and-survivor pension option. A CRPC practitioner would place the GREATEST emphasis on:
Answer: The health status, ages, and financial independence of both spouses
The choice between single-life and J&S depends heavily on each spouse's health, life expectancy, and whether the survivor has independent income to replace the lost pension benefit.