CRPC Retirement Income and Management 4

Question 1

What distinguishes a 'defined benefit' pension plan from a 'defined contribution' plan in terms of retirement income certainty?

Accepted Answer

Defined benefit plans guarantee a specific monthly benefit; defined contribution plans have uncertain outcomes based on investment performance

Answer

Defined benefit plans promise a specific monthly income based on a formula, while defined contribution plans accumulate assets whose income potential depends on investment returns.

Question 2

What is 'Medigap' (Medicare Supplement Insurance) designed to do?

Accepted Answer

Cover costs not paid by Original Medicare such as copays, coinsurance, and deductibles

Answer

Medigap policies fill the gaps in Original Medicare coverage by paying cost-sharing amounts that beneficiaries would otherwise owe.

Question 3

A retiree implements a 'rising equity glidepath' strategy. What does this involve?

Accepted Answer

Starting retirement with a conservative allocation that gradually becomes more equity-heavy over time

Answer

A rising equity glidepath begins conservatively to protect against early sequence risk, then shifts toward equities as the retiree ages and the remaining time horizon changes.

Question 4

Which form of Social Security benefit can a non-working spouse receive, and what is its maximum amount relative to the worker's benefit?

Accepted Answer

Spousal benefit equal to up to 50% of the worker's full retirement age benefit

Answer

A spouse who did not work can claim a spousal benefit worth up to 50% of the working spouse's primary insurance amount (PIA) at full retirement age.

Question 5

What is the main risk associated with relying heavily on a single-premium immediate annuity (SPIA) for retirement income?

Accepted Answer

The lump sum is irrevocably committed and there is no liquidity for large unexpected expenses

Answer

Once a SPIA is purchased, the premium is converted to an income stream and is no longer available as a liquid asset for emergencies.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Retirement Income and Management 4