CRPC Investment Strategies for Retirement 4

Question 1

A client is evaluating a deferred income annuity (DIA) that begins payments at age 85. The PRIMARY benefit of this product is:

Accepted Answer

Inexpensive longevity insurance with a low premium

Answer

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.

Question 2

Which statement BEST describes the role of rebalancing in a retirement portfolio?

Accepted Answer

Rebalancing maintains the intended risk level as markets shift allocations

Answer

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.

Question 3

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?

Accepted Answer

$40,000 in year one; amount is adjusted for inflation each year

Answer

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.

Question 4

What is the primary difference between a fixed annuity and a variable annuity in retirement planning?

Accepted Answer

Fixed annuities credit a declared interest rate; variable annuities invest in subaccounts with market-linked returns

Answer

Fixed annuities credit a declared rate to the accumulation value, while variable annuities allocate premiums to investment subaccounts whose returns fluctuate with market performance.

Question 5

A 65-year-old client holds 40% of his retirement portfolio in his former employer's stock. A CRPC practitioner would FIRST recommend:

Accepted Answer

Evaluating the tax consequences of selling before recommending a diversification plan

Answer

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.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Investment Strategies for Retirement 4