CRPC Retirement Needs Analysis 3

Question 1

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?

Accepted Answer

$1,700

Answer

$6,500 − ($3,000 + $1,800) = $1,700 per month must come from personal savings or investments.

Question 2

Which factor most significantly increases a client's required retirement nest egg when all other variables are held constant?

Accepted Answer

Increasing life expectancy by 5 years

Answer

Extending the distribution period by 5 years substantially increases the required capital because withdrawals must be sustained over a longer horizon.

Question 3

What does the term 'sequence of returns risk' refer to in retirement planning?

Accepted Answer

The danger that poor investment returns early in retirement can permanently deplete a portfolio

Answer

Sequence of returns risk is the danger that a portfolio will be severely damaged by poor early-retirement returns combined with ongoing withdrawals.

Question 4

A 65-year-old client has $900,000 in retirement savings. Using the 4% withdrawal guideline, what initial annual withdrawal is recommended?

Accepted Answer

$36,000

Answer

$900,000 × 4% = $36,000 per year as the initial sustainable withdrawal under the 4% rule.

Question 5

Which of the following is an example of a non-recurring retirement expense that a retirement needs analysis should account for?

Accepted Answer

One-time home renovation upon retirement

Answer

Non-recurring expenses like a home renovation at retirement represent lump-sum costs outside regular monthly income needs.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Retirement Needs Analysis 3