Retirement Planning Principles 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 Planning Principles flashcards as text
What is the primary purpose of a 'bridge' strategy using non-retirement assets between early retirement and Social Security claiming at age 70?
Answer: To allow Social Security delayed retirement credits to accumulate while funding living expenses
A bridge strategy uses savings or other income to cover expenses from retirement until age 70 so Social Security benefits grow at 8% per year via delayed retirement credits.
A married couple wants to maximize survivor income from Social Security. Which claiming strategy is generally most effective for a higher-earning spouse in good health?
Answer: The higher earner delays to age 70 to maximize the survivor benefit available to the lower-earning spouse
The survivor benefit equals the deceased spouse's benefit amount, so maximizing the higher earner's benefit by delaying to 70 maximizes the survivor's lifetime income.
In the context of retirement income planning, what is 'longevity risk'?
Answer: The risk of outliving one's financial resources due to a longer-than-expected lifespan
Longevity risk is the possibility that a retiree will live longer than their financial resources last, requiring planning for lifespans well beyond average life expectancy.
A client age 55 wants to take penalty-free distributions from their 401(k). Which rule allows this without the 10% early withdrawal penalty?
Answer: The Rule of 55, which allows penalty-free 401(k) withdrawals after separating from service in or after the year turning 55
The Rule of 55 allows penalty-free withdrawals from a current employer's 401(k) if the employee separates from service in or after the calendar year they turn 55.
Which type of risk refers to the possibility that rising prices will erode the purchasing power of fixed retirement income over time?
Answer: Inflation risk
Inflation risk is the danger that a fixed nominal income stream buys progressively less over a retirement that may span 20–30+ years.
A retirement plan uses a 'total return' investment philosophy. What does this approach emphasize?
Answer: Combining capital appreciation and income to meet withdrawal needs, rebalancing periodically
Total return investing uses the combined return from both income and capital appreciation to fund withdrawals, allowing broader diversification than an income-only approach.
When evaluating whether to take a pension lump sum versus an annuity payout, which factor most favors choosing the lump sum?
Answer: The pension plan sponsor has weak financial health, raising concerns about future payment security
If the plan sponsor's financial stability is questionable, taking the lump sum eliminates the risk that future annuity payments could be reduced or defaulted.