Retirement Needs Analysis 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 Retirement Needs Analysis flashcards as text
A client has a defined benefit pension that pays $3,000/month and Social Security of $1,800/month. Her estimated retirement budget is $6,500/month. What is the monthly income gap she must fund from savings?
Answer: $1,700
$6,500 − ($3,000 + $1,800) = $1,700 per month must come from personal savings or investments.
Which factor most significantly increases a client's required retirement nest egg when all other variables are held constant?
Answer: Increasing life expectancy by 5 years
Extending the distribution period by 5 years substantially increases the required capital because withdrawals must be sustained over a longer horizon.
What does the term 'sequence of returns risk' refer to in retirement planning?
Answer: The danger that poor investment returns early in retirement can permanently deplete a portfolio
Sequence of returns risk is the danger that a portfolio will be severely damaged by poor early-retirement returns combined with ongoing withdrawals.
A 65-year-old client has $900,000 in retirement savings. Using the 4% withdrawal guideline, what initial annual withdrawal is recommended?
Answer: $36,000
$900,000 × 4% = $36,000 per year as the initial sustainable withdrawal under the 4% rule.
Which of the following is an example of a non-recurring retirement expense that a retirement needs analysis should account for?
Answer: One-time home renovation upon retirement
Non-recurring expenses like a home renovation at retirement represent lump-sum costs outside regular monthly income needs.
When using the expense method to estimate retirement income needs, which spending category typically DECREASES significantly in retirement compared to working years?
Answer: Work-related expenses such as commuting and clothing
Work-related costs like commuting, business attire, and lunches typically disappear or drop sharply after retirement.
A client's pension offers a single-life annuity of $2,500/month or a joint-and-survivor annuity of $2,100/month. The primary consideration in choosing between them should be:
Answer: Whether the spouse has independent retirement income
If the spouse has sufficient independent income, the single-life annuity may be acceptable; otherwise the survivor benefit is critical to spousal financial security.