CRPC ALL 2025/2026. 100% Verified.
Planning for Retirement 20 Years Out
-Create an emergency fund of three to six months of living expenses to avoid tapping into your
401(k) or home equity in the event of an emergency.
-Boost your earning potential and benefits package by contributing the maximum annual amount to
your 401(k), or at least enough to receive any available employer match.
-Ensure you have a diversified investment portfolio so that you are invested for inflation-fighting
growth and your assets are distributed across taxable, tax-deferred, and tax-free sources. Consider
consolidating multiple retirement or brokerage accounts to simplify record keeping and possibly
reduce expenses.
Planning for Retirement 10 Years Out
-Consider any big-ticket financial commitments you anticipate in the next 10 years and how these
items might affect your retirement timeline.
-Review your estate documents to ensure the language is up to date. Your estate documents should
include items such as a will, a power of attorney, a living will, a health care proxy, and possibly a
revocable trust.
-Reallocate your investment portfolio based on your earnings timeline, focusing on performance,
risk, and expenses.
Planning for Retirement 5 Years Out
-Consider any big-ticket financial commitments you anticipate in the next 10 years and how these
items might affect your retirement timeline.
-Review your estate documents to ensure the language is up to date. Your estate documents should
include items such as a will, a power of attorney, a living will, a health care proxy, and possibly a
revocable trust.
-Reallocate your investment portfolio based on your earnings timeline, focusing on performance,
risk, and expenses.
Defined Benefit Plans
Businesses today are less likely to offer these plans. DB plans are designed to provide participants
with a guaranted lifetime income or pension; these plans are becoming increasingly scarce. Mostly,
there are costs and risks to employers and people are living longer!
Defined contribution (DC) plans are their replacement. The investment accounts are focused on
investment returns and account value rather than income goals. Plan risks are borne by the
participants, too.
The Six-Step Retirement Planning Process
1. Establishing and defining the client-planner relationship
2. Gathering client data including goals
3. Analyzing and evaluating the client's financial status
4. Developing and presenting recommendations
5. Implementing recommendations
6. Monitoring the implemented recommendations for necessary changes
,HINT: If you're having trouble remembering the six steps of the retirement planning process, try
memorizing the following mnemonic: EGADIM (EGAD I Made it)
E - Establish client relationship
G - Gather data
A - Analyze data
D - Develop plan
I - Implement plan
M - Monitor plan
The Role of the Retirement Counselor
The role of the retirement counselor is to facilitate comprehensive retirement planning through a
prudent and coordinated set of recommendations consistent with the client's needs, goals,
attitudes, and resources. This invariably requires a relationship between the client and counselor
based upon trust and a mutually defined understanding of the scope of services to be offered.
Gathering Data
You need both quantitative and qualitative date in understanding the client. The data needed is:-
family and dependent data-names, addresses, telephone numbers of other advisers they work with
-assets, liabilities, net worth
-income data
-insurance and tax situation
-employee financial benefits including stock options
-investment experience, holdings, and outlook
-retirement planning data
-client owned business information-time horizons-anticipated educational, gifting, or other financial
requirements
-client and family health status
-interests
-occupation and employment expectations
-risk tolerance
-changes in lifestyle
-financial goals
There's a CRPC Data Gathering Form
Assets
Cash/cash equivalents, invested assets, and personal assets. Assets should be valued at their current
fair market value.
Leased property and equipment are typically not included as assets but are shown in the footnotes.
Liabilities
Amounts owed to creditors and there are both short and long term liabilities included on the
statement of financial position.
There are short and long term; short being less than one year from the statement date.
,Net Worth
Net Worth indicates the monetary value the client would have if all assets were converted to cash at
the fair market value listed; then used to pay of outstanding debts.
Statement of Cash Flow (Income Statement)
Cash inflows less cash outflows is the net cash flow or deficit.
Determining Goals
Goals need to be specific, sometimes multiple.There must be clear time horizons and amounts.
These goals must be prioritized since there may be insufficient resources to accomplish them. The
typical hierarchy of financial goals are:
1. basic needs
2. safety
3. managing finances (debt, mortgages)
4. esteem (vacations, travel, etc)
5. self-actualization (financial freedom)
Costs for Retirees
-Many retirees find that they spend less on housing, often because their mortgages are paid off by
the time they retire or because they sell their large homes and buy smaller, less expensive houses or
condominiums. This may not be the case if a second home is in the plan. Don't forget, though, that
even a paid-off home is not expense-free; real estate taxes, utilities, insurance, and repairs will
remain.
-Retirees also tend to spend less on parking, dry cleaning, apparel, and education than do
nonretirees.
-Second cars for married couples are less necessary. Eliminating one vehicle reduces insurance
expenses, vehicle registration taxes, license fees, and maintenance.
-Expenditures for Social Security and retirement plans disappear.
-Total income taxes may diminish in step with earned income reduction. Taxation, however, will be
impacted by the amount of income coming from a qualified retirement plan, which will be fully
taxable upon distribution.
Income Replacement Percentages
Replacement Ratios are rough guides in determining the amount of income needed in retirement.
It's common to say that retirees need 70% to 80% of preretirement income to support a similar
lifestyle in retirement. This is entirely dependent on the lifestyle that the person wants to live later
on.
Determining the Retirement Savings Need
1. calculate net annual retirement income need. This is done by seeing the sources of inflation-
adjusted income from a total need; these may include SS income or pension income.
2. adjust income deficit for inflation over preretirement period. Determine income needed in the
first year as adjusted for inflation
3. determine total retirement fund needed. The calculated lump=sum retirement fund is the total
fund needed on day one of retirement. This amount, invested at the IRR, will generate annual
income payments equal to the deficit which will grow with inflation each year.
, 4. determine savings amount needed - level payment and serial payments. Once the lump amount is
determined, then annual savings or serial payments can be calculated.
Example:
Example. Fred and Wilma's annual retirement income need (in today's dollars) is $70,000. They
anticipate annual Social Security benefits of $36,000, and Wilma will receive a small government
pension (adjusted each year for inflation) for $4,000 a year (in today's dollars). Their retirement
income deficit can be calculated as follows: $70,000 - ($36,000 + $4,000) = $30,000. This means that,
expressed in today's dollars, their retirement income deficit is $30,000.
Do the rest on paper. See the example on Ch. 4 on Module 1.
Inflation Adjusted Return
A rate of return that is measured in terms of real goods and services; that is, after the effects of
inflation have been factored out.
Inflation adjusted yield formula:
([(1 + ROR)/(1+inflation rate)] - 1) x 100
Capital Preservation
Living off only the cash flow of an asset pool.
Level Savings Approach
Take the lump sum amount needed at retirement and calculate the payment needed to reach that
amount using the assumed ROR.
Example. Returning to Fred and Wilma, we had determined that they needed to save an additional
$1,144,480 by the beginning of retirement to make up for their shortfall from Social Security and any
inflation-adjusted pensions to achieve the level of retirement income that they desired using the
capital utilization method ($30,000 in today's dollars, $62,813 in retirement year one dollars).
Remember that Fred and Wilma have 25 years until retirement, so the annual level savings amount
would be:
1,144,480 FV
25 N
7 I/YR
PMT = $18,095
Serial Savings Approach
Serial savings are payments that increase with inflation. This is often the preferable way to fund a
long term goal because the savings dollar amount will increase annually at rate of inflation.
1. deflate the lump sum needed at retirement into today's dollars using hte inflation rate as a
discount rate
2. calculate the payment using the discounted lump sum from step 1 as a future value and an
inflation-adjusted return as the interest rate
3. once the payment has been solved, it will need to be increased by that inflation rate in order to
arrive at the end of first year payment
Planning for Retirement 20 Years Out
-Create an emergency fund of three to six months of living expenses to avoid tapping into your
401(k) or home equity in the event of an emergency.
-Boost your earning potential and benefits package by contributing the maximum annual amount to
your 401(k), or at least enough to receive any available employer match.
-Ensure you have a diversified investment portfolio so that you are invested for inflation-fighting
growth and your assets are distributed across taxable, tax-deferred, and tax-free sources. Consider
consolidating multiple retirement or brokerage accounts to simplify record keeping and possibly
reduce expenses.
Planning for Retirement 10 Years Out
-Consider any big-ticket financial commitments you anticipate in the next 10 years and how these
items might affect your retirement timeline.
-Review your estate documents to ensure the language is up to date. Your estate documents should
include items such as a will, a power of attorney, a living will, a health care proxy, and possibly a
revocable trust.
-Reallocate your investment portfolio based on your earnings timeline, focusing on performance,
risk, and expenses.
Planning for Retirement 5 Years Out
-Consider any big-ticket financial commitments you anticipate in the next 10 years and how these
items might affect your retirement timeline.
-Review your estate documents to ensure the language is up to date. Your estate documents should
include items such as a will, a power of attorney, a living will, a health care proxy, and possibly a
revocable trust.
-Reallocate your investment portfolio based on your earnings timeline, focusing on performance,
risk, and expenses.
Defined Benefit Plans
Businesses today are less likely to offer these plans. DB plans are designed to provide participants
with a guaranted lifetime income or pension; these plans are becoming increasingly scarce. Mostly,
there are costs and risks to employers and people are living longer!
Defined contribution (DC) plans are their replacement. The investment accounts are focused on
investment returns and account value rather than income goals. Plan risks are borne by the
participants, too.
The Six-Step Retirement Planning Process
1. Establishing and defining the client-planner relationship
2. Gathering client data including goals
3. Analyzing and evaluating the client's financial status
4. Developing and presenting recommendations
5. Implementing recommendations
6. Monitoring the implemented recommendations for necessary changes
,HINT: If you're having trouble remembering the six steps of the retirement planning process, try
memorizing the following mnemonic: EGADIM (EGAD I Made it)
E - Establish client relationship
G - Gather data
A - Analyze data
D - Develop plan
I - Implement plan
M - Monitor plan
The Role of the Retirement Counselor
The role of the retirement counselor is to facilitate comprehensive retirement planning through a
prudent and coordinated set of recommendations consistent with the client's needs, goals,
attitudes, and resources. This invariably requires a relationship between the client and counselor
based upon trust and a mutually defined understanding of the scope of services to be offered.
Gathering Data
You need both quantitative and qualitative date in understanding the client. The data needed is:-
family and dependent data-names, addresses, telephone numbers of other advisers they work with
-assets, liabilities, net worth
-income data
-insurance and tax situation
-employee financial benefits including stock options
-investment experience, holdings, and outlook
-retirement planning data
-client owned business information-time horizons-anticipated educational, gifting, or other financial
requirements
-client and family health status
-interests
-occupation and employment expectations
-risk tolerance
-changes in lifestyle
-financial goals
There's a CRPC Data Gathering Form
Assets
Cash/cash equivalents, invested assets, and personal assets. Assets should be valued at their current
fair market value.
Leased property and equipment are typically not included as assets but are shown in the footnotes.
Liabilities
Amounts owed to creditors and there are both short and long term liabilities included on the
statement of financial position.
There are short and long term; short being less than one year from the statement date.
,Net Worth
Net Worth indicates the monetary value the client would have if all assets were converted to cash at
the fair market value listed; then used to pay of outstanding debts.
Statement of Cash Flow (Income Statement)
Cash inflows less cash outflows is the net cash flow or deficit.
Determining Goals
Goals need to be specific, sometimes multiple.There must be clear time horizons and amounts.
These goals must be prioritized since there may be insufficient resources to accomplish them. The
typical hierarchy of financial goals are:
1. basic needs
2. safety
3. managing finances (debt, mortgages)
4. esteem (vacations, travel, etc)
5. self-actualization (financial freedom)
Costs for Retirees
-Many retirees find that they spend less on housing, often because their mortgages are paid off by
the time they retire or because they sell their large homes and buy smaller, less expensive houses or
condominiums. This may not be the case if a second home is in the plan. Don't forget, though, that
even a paid-off home is not expense-free; real estate taxes, utilities, insurance, and repairs will
remain.
-Retirees also tend to spend less on parking, dry cleaning, apparel, and education than do
nonretirees.
-Second cars for married couples are less necessary. Eliminating one vehicle reduces insurance
expenses, vehicle registration taxes, license fees, and maintenance.
-Expenditures for Social Security and retirement plans disappear.
-Total income taxes may diminish in step with earned income reduction. Taxation, however, will be
impacted by the amount of income coming from a qualified retirement plan, which will be fully
taxable upon distribution.
Income Replacement Percentages
Replacement Ratios are rough guides in determining the amount of income needed in retirement.
It's common to say that retirees need 70% to 80% of preretirement income to support a similar
lifestyle in retirement. This is entirely dependent on the lifestyle that the person wants to live later
on.
Determining the Retirement Savings Need
1. calculate net annual retirement income need. This is done by seeing the sources of inflation-
adjusted income from a total need; these may include SS income or pension income.
2. adjust income deficit for inflation over preretirement period. Determine income needed in the
first year as adjusted for inflation
3. determine total retirement fund needed. The calculated lump=sum retirement fund is the total
fund needed on day one of retirement. This amount, invested at the IRR, will generate annual
income payments equal to the deficit which will grow with inflation each year.
, 4. determine savings amount needed - level payment and serial payments. Once the lump amount is
determined, then annual savings or serial payments can be calculated.
Example:
Example. Fred and Wilma's annual retirement income need (in today's dollars) is $70,000. They
anticipate annual Social Security benefits of $36,000, and Wilma will receive a small government
pension (adjusted each year for inflation) for $4,000 a year (in today's dollars). Their retirement
income deficit can be calculated as follows: $70,000 - ($36,000 + $4,000) = $30,000. This means that,
expressed in today's dollars, their retirement income deficit is $30,000.
Do the rest on paper. See the example on Ch. 4 on Module 1.
Inflation Adjusted Return
A rate of return that is measured in terms of real goods and services; that is, after the effects of
inflation have been factored out.
Inflation adjusted yield formula:
([(1 + ROR)/(1+inflation rate)] - 1) x 100
Capital Preservation
Living off only the cash flow of an asset pool.
Level Savings Approach
Take the lump sum amount needed at retirement and calculate the payment needed to reach that
amount using the assumed ROR.
Example. Returning to Fred and Wilma, we had determined that they needed to save an additional
$1,144,480 by the beginning of retirement to make up for their shortfall from Social Security and any
inflation-adjusted pensions to achieve the level of retirement income that they desired using the
capital utilization method ($30,000 in today's dollars, $62,813 in retirement year one dollars).
Remember that Fred and Wilma have 25 years until retirement, so the annual level savings amount
would be:
1,144,480 FV
25 N
7 I/YR
PMT = $18,095
Serial Savings Approach
Serial savings are payments that increase with inflation. This is often the preferable way to fund a
long term goal because the savings dollar amount will increase annually at rate of inflation.
1. deflate the lump sum needed at retirement into today's dollars using hte inflation rate as a
discount rate
2. calculate the payment using the discounted lump sum from step 1 as a future value and an
inflation-adjusted return as the interest rate
3. once the payment has been solved, it will need to be increased by that inflation rate in order to
arrive at the end of first year payment
