CRPC 2026 QUESTIONS AND
ANSWERS (GRADED A+)
Identify three current trends in retirement planning. (There are 4 discussed) - ANSWER-
1. There is a decrease in the likelihood of today's businesses offering defined benefit
(DB) plans.
2. increased focus on planning for longevity
3. expansion of employer-sponsored financial wellness initiatives
4. expansion of plan distribution options
Discuss challenges associated with the shift from defined benefit to defined contribution
plans - ANSWER-With defined contribution plans, risks are borne by plan
participants/employees rather than by plan sponsors/employers (as with defined benefit
plans). Many of these employees have little to no financial expertise
Identify the seven steps of the retirement planning process. - ANSWER-1.
understanding the client's personal and financial circumstances
2. identifying and selecting goals
3. analyzing the client's current course of action and potential alternative course(s) of
action
4. developing the retirement planning recommendation(s)
5. presenting the recommendation(s)
6. implementing the recommendation(s)
7. monitoring progress and updating
What two qualities should retirement goals have to make them useful in planning? -
ANSWER-To be useful in planning, retirement goals should be specific and prioritized.
A specific goal indicates an event, an amount, and/or a time
Why is it important for clients to have goals after they retire? - ANSWER-Goals help
people have a purpose. They also give structure. Many goals after retirement should be
relational. For example, how many times will they meet with friends a week? What will
they do with their time?
What are "income replacement percentages" - ANSWER-Income replacement
percentages (or "replacement ratios") are rough guides used in determining the amount
of income needed in retirement, using preretirement income as a base. For example,
most American retirees need 70%-80% of preretirement income in order to maintain
current living standards.
Why should caution be used in applying income replacement percentages? - ANSWER-
Income replacement percentages are simply "rules of thumb." Because their retirement
,lifestyle goals differ greatly, no two clients will need the same percentage of
preretirement income to make ends meet in retirement. Some intend to travel and live
life to the hilt, often at great cost. Others plan to live more simply and frugally. Income
replacement percentages are useful in influencing the thinking of younger clients, but
they should not be used as the basis for detailed planning.
In estimating a client's retirement income needs, identify some current expenses that
are likely to decrease during retirement, and one or two that will likely increase. During
retirement, many items of expense tend to be less or zero. These may include the
following: - ANSWER-Goes Down:
- Transportation costs
- Food and housing costs usually are less—
- Term life insurance and disability premiums can usually be stopped entirely.
- Dry cleaning bills, professional fees, clothing expenses, and other costs associated
with working diminish.
Goes up:
- medical and dental expenses
- expenditures on hobbies, recreation, and travel
Which of a client's assets should not be included in any list of retirement income
producers? When you look through the statement of financial position to identify assets
that might produce income during retirement, do not include - ANSWER-- Emergency
funds—the client will need these funds for emergencies during retirement.
- Funds intended for college education.
- The value of the personal residence. In most cases, even if the client sells the house,
they will have to purchase a replacement or begin paying rent. However, be alert to
situations in which the retiree sells their current residence and replaces it with a lower-
cost dwelling; the cost difference may be available for income-producing investments.
Identify and describe the three key components of a statement of financial position -
ANSWER-1. Assets. Assets are what the client owns: cash, securities, property, and
other resources.
2. Liabilities. Liabilities are what the client owes: credit card debts, mortgages, auto note
balances, etc.
3. Net worth. Net worth is defined as assets minus liabilities. It represents what the
client would have left over if they liquidated all assets at fair market value and used the
proceeds to pay off all liabilities.
Describe the cash flow statement and the equation that defines it. - ANSWER-The cash
flow statement is a financial statement that describes cash inflows (from salaries,
investment returns, rents, etc.) and cash outflows (for living expenses, loan payments,
savings, taxes, etc.). It is defined by the following equation:
Cash inflows - Cash outflows = Net cash surplus (deficit)
,Which statement would the following amounts be found on, the Statement of Financial
Position or the Cash Flow Statement? Place "SFP" beside the items that belong on the
statement of financial position and "CFS" beside the items that belong on the cash flow
statement.
a. Taxes
b. Checking account
c. Truck
d. Salary
e. Car payments
f. Credit card balance
g. Dividends received
h. 401(k) balance
i. Mortgage payment
j. Mortgage Balance - ANSWER-CFS a. Taxes
SFP b. Checking account
SFP c. Truck
CFS d. Salary
CFS e. Car payments
SFP f. Credit card balance
CFS g. Dividends received
SFP h. 401(k) balance
CFS i. Mortgage payment
SFP j. Mortgage Balance
The point is that a statement of financial positions is a snapshot of account balances
one day. A cash flow statement covers a series of payments over a time period, usually
one month or one
year. A year is better because some cash flows (like real estate taxes) are not monthly.
Thus, "taxes" would mean taxes paid during the year. If someone was behind on their
taxes, they
would owe the IRS a balance and the item would be called something like "taxes in
arrears" or "balance owed to the IRS.
What are the names and characteristics of the two strategies clients can employ in living
off their retirement assets - ANSWER-Retirees can follow one of two strategies in living
off their retirement assets:
1. Capital preservation. Followers of this strategy live off the income produced by their
assets without touching the principal. This strategy assures that they will not outlive their
incomes. A very large asset pool is required to follow this strategy.
2. Capital utilization. In this strategy, both income and principal are tapped for retirement
living expenses. These retirees must make a good estimate of their life spans,
otherwise they risk outliving their incomes.
, Identify several financial goals that may conflict with retirement goals. - ANSWER-
housing
education
emergency funds
care of elderly parents or a disabled child
Describe a method for eventually realizing several competing financial goals. -
ANSWER-The problem of competing financial goals is commonplace. One way to deal
with it is to work with a client to (1) prioritize the goals, and (2) sequence them.
What are the two purposes of investment policy? - ANSWER-Investment policy serves
two purposes:
1. It provides a foundation of goals, time horizons, and constraints on which the client
portfolio is constructed. For example, the policy may establish the goal of preserving the
purchasing power of the portfolio while providing periodic distributions, and it may limit
the acceptable securities to large-company stocks and U.S. Treasury securities.
2. The goals, time horizons, and constraints provide a basis for periodic review by the
client and money manager.
Why is a long-term perspective essential as an element of investment policy? -
ANSWER-U.S. financial markets and many markets overseas have a positive bias in
favor of the investor. But this positive bias generally plays out over time. In the short
term, the investments that produce sizable returns generally go hand-in-hand with price
fluctuations. By taking a long-term view, however, these short-term fluctuations can be
ignore
Why is it important that investment policy be clearly defined? - ANSWER-A clear
definition of the investment policy helps the planner avoid errors and reduces the
chance of disputes between planner and client. An example of a clear definition would
be any of the following:
- No securities or mutual funds with betas greater than 1.15 will be permitted in the
portfolio.
- Only listed stocks may be purchased.
- The portfolio will not use options or futures except to hedge risk.
At a minimum, what five elements should every investment policy contain? Briefly
explain or provide examples. - ANSWER-1. A clear statement of the client's investment
goals. Goals can be stated in relative terms (e.g., stock returns equal to the market as a
whole, as measured against the S&P 500 index).
2. A statement identifying the investment vehicles and investment strategies deemed
suitable (and unsuitable) for the portfolio. Examples would include "all corporate fixed-
income securities will be A-rated or better," and "no short selling will be allowed."
3. A statement of the risk level acceptable to the client, as well as how risk will be
managed or controlled (through diversification, rotation from long-term to short-term
ANSWERS (GRADED A+)
Identify three current trends in retirement planning. (There are 4 discussed) - ANSWER-
1. There is a decrease in the likelihood of today's businesses offering defined benefit
(DB) plans.
2. increased focus on planning for longevity
3. expansion of employer-sponsored financial wellness initiatives
4. expansion of plan distribution options
Discuss challenges associated with the shift from defined benefit to defined contribution
plans - ANSWER-With defined contribution plans, risks are borne by plan
participants/employees rather than by plan sponsors/employers (as with defined benefit
plans). Many of these employees have little to no financial expertise
Identify the seven steps of the retirement planning process. - ANSWER-1.
understanding the client's personal and financial circumstances
2. identifying and selecting goals
3. analyzing the client's current course of action and potential alternative course(s) of
action
4. developing the retirement planning recommendation(s)
5. presenting the recommendation(s)
6. implementing the recommendation(s)
7. monitoring progress and updating
What two qualities should retirement goals have to make them useful in planning? -
ANSWER-To be useful in planning, retirement goals should be specific and prioritized.
A specific goal indicates an event, an amount, and/or a time
Why is it important for clients to have goals after they retire? - ANSWER-Goals help
people have a purpose. They also give structure. Many goals after retirement should be
relational. For example, how many times will they meet with friends a week? What will
they do with their time?
What are "income replacement percentages" - ANSWER-Income replacement
percentages (or "replacement ratios") are rough guides used in determining the amount
of income needed in retirement, using preretirement income as a base. For example,
most American retirees need 70%-80% of preretirement income in order to maintain
current living standards.
Why should caution be used in applying income replacement percentages? - ANSWER-
Income replacement percentages are simply "rules of thumb." Because their retirement
,lifestyle goals differ greatly, no two clients will need the same percentage of
preretirement income to make ends meet in retirement. Some intend to travel and live
life to the hilt, often at great cost. Others plan to live more simply and frugally. Income
replacement percentages are useful in influencing the thinking of younger clients, but
they should not be used as the basis for detailed planning.
In estimating a client's retirement income needs, identify some current expenses that
are likely to decrease during retirement, and one or two that will likely increase. During
retirement, many items of expense tend to be less or zero. These may include the
following: - ANSWER-Goes Down:
- Transportation costs
- Food and housing costs usually are less—
- Term life insurance and disability premiums can usually be stopped entirely.
- Dry cleaning bills, professional fees, clothing expenses, and other costs associated
with working diminish.
Goes up:
- medical and dental expenses
- expenditures on hobbies, recreation, and travel
Which of a client's assets should not be included in any list of retirement income
producers? When you look through the statement of financial position to identify assets
that might produce income during retirement, do not include - ANSWER-- Emergency
funds—the client will need these funds for emergencies during retirement.
- Funds intended for college education.
- The value of the personal residence. In most cases, even if the client sells the house,
they will have to purchase a replacement or begin paying rent. However, be alert to
situations in which the retiree sells their current residence and replaces it with a lower-
cost dwelling; the cost difference may be available for income-producing investments.
Identify and describe the three key components of a statement of financial position -
ANSWER-1. Assets. Assets are what the client owns: cash, securities, property, and
other resources.
2. Liabilities. Liabilities are what the client owes: credit card debts, mortgages, auto note
balances, etc.
3. Net worth. Net worth is defined as assets minus liabilities. It represents what the
client would have left over if they liquidated all assets at fair market value and used the
proceeds to pay off all liabilities.
Describe the cash flow statement and the equation that defines it. - ANSWER-The cash
flow statement is a financial statement that describes cash inflows (from salaries,
investment returns, rents, etc.) and cash outflows (for living expenses, loan payments,
savings, taxes, etc.). It is defined by the following equation:
Cash inflows - Cash outflows = Net cash surplus (deficit)
,Which statement would the following amounts be found on, the Statement of Financial
Position or the Cash Flow Statement? Place "SFP" beside the items that belong on the
statement of financial position and "CFS" beside the items that belong on the cash flow
statement.
a. Taxes
b. Checking account
c. Truck
d. Salary
e. Car payments
f. Credit card balance
g. Dividends received
h. 401(k) balance
i. Mortgage payment
j. Mortgage Balance - ANSWER-CFS a. Taxes
SFP b. Checking account
SFP c. Truck
CFS d. Salary
CFS e. Car payments
SFP f. Credit card balance
CFS g. Dividends received
SFP h. 401(k) balance
CFS i. Mortgage payment
SFP j. Mortgage Balance
The point is that a statement of financial positions is a snapshot of account balances
one day. A cash flow statement covers a series of payments over a time period, usually
one month or one
year. A year is better because some cash flows (like real estate taxes) are not monthly.
Thus, "taxes" would mean taxes paid during the year. If someone was behind on their
taxes, they
would owe the IRS a balance and the item would be called something like "taxes in
arrears" or "balance owed to the IRS.
What are the names and characteristics of the two strategies clients can employ in living
off their retirement assets - ANSWER-Retirees can follow one of two strategies in living
off their retirement assets:
1. Capital preservation. Followers of this strategy live off the income produced by their
assets without touching the principal. This strategy assures that they will not outlive their
incomes. A very large asset pool is required to follow this strategy.
2. Capital utilization. In this strategy, both income and principal are tapped for retirement
living expenses. These retirees must make a good estimate of their life spans,
otherwise they risk outliving their incomes.
, Identify several financial goals that may conflict with retirement goals. - ANSWER-
housing
education
emergency funds
care of elderly parents or a disabled child
Describe a method for eventually realizing several competing financial goals. -
ANSWER-The problem of competing financial goals is commonplace. One way to deal
with it is to work with a client to (1) prioritize the goals, and (2) sequence them.
What are the two purposes of investment policy? - ANSWER-Investment policy serves
two purposes:
1. It provides a foundation of goals, time horizons, and constraints on which the client
portfolio is constructed. For example, the policy may establish the goal of preserving the
purchasing power of the portfolio while providing periodic distributions, and it may limit
the acceptable securities to large-company stocks and U.S. Treasury securities.
2. The goals, time horizons, and constraints provide a basis for periodic review by the
client and money manager.
Why is a long-term perspective essential as an element of investment policy? -
ANSWER-U.S. financial markets and many markets overseas have a positive bias in
favor of the investor. But this positive bias generally plays out over time. In the short
term, the investments that produce sizable returns generally go hand-in-hand with price
fluctuations. By taking a long-term view, however, these short-term fluctuations can be
ignore
Why is it important that investment policy be clearly defined? - ANSWER-A clear
definition of the investment policy helps the planner avoid errors and reduces the
chance of disputes between planner and client. An example of a clear definition would
be any of the following:
- No securities or mutual funds with betas greater than 1.15 will be permitted in the
portfolio.
- Only listed stocks may be purchased.
- The portfolio will not use options or futures except to hedge risk.
At a minimum, what five elements should every investment policy contain? Briefly
explain or provide examples. - ANSWER-1. A clear statement of the client's investment
goals. Goals can be stated in relative terms (e.g., stock returns equal to the market as a
whole, as measured against the S&P 500 index).
2. A statement identifying the investment vehicles and investment strategies deemed
suitable (and unsuitable) for the portfolio. Examples would include "all corporate fixed-
income securities will be A-rated or better," and "no short selling will be allowed."
3. A statement of the risk level acceptable to the client, as well as how risk will be
managed or controlled (through diversification, rotation from long-term to short-term
