CRPC Investment Strategies for Retirement 2

Question 1

A retiree in the 'go-go' phase wants maximum growth. Which portfolio allocation is LEAST appropriate for a 68-year-old with no pension?

Accepted Answer

100% equities / 0% bonds

Answer

A 100% equity allocation exposes a retiree to severe sequence-of-returns risk with no buffer assets to draw from during downturns.

Question 2

Which strategy involves holding increasingly liquid assets in successive 'buckets' to fund near-term, mid-term, and long-term retirement spending?

Accepted Answer

Time segmentation (bucket) strategy

Answer

The time segmentation or bucket strategy segments assets by time horizon, with cash/short-term bonds covering near-term needs and equities funding later years.

Question 3

An investor holds a large concentrated stock position in her former employer. The PRIMARY risk she faces is:

Accepted Answer

Idiosyncratic (unsystematic) risk

Answer

Idiosyncratic risk is company-specific risk that cannot be diversified away when a portfolio is heavily concentrated in one stock.

Question 4

A CRPC practitioner recommends dividend-growth stocks for a client seeking retirement income. The MAIN advantage over high-yield bonds for income is:

Accepted Answer

Potential for rising income that can outpace inflation

Answer

Dividend-growth stocks have historically increased distributions over time, providing an income stream that can keep pace with or exceed inflation unlike fixed bond coupon payments.

Question 5

The 'rising equity glidepath' concept in retirement suggests that equity allocation should:

Accepted Answer

Increase in the early retirement years before declining later

Answer

Research by Pfau and Kitces suggests starting with a lower equity allocation and increasing it gradually reduces sequence-of-returns risk in early retirement.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Investment Strategies for Retirement 2