Try 10 focused CFP® questions on Retirement Savings and Income Planning, with answers and explanations, then continue with Securities Prep.
| Field | Detail |
|---|---|
| Exam route | CFP® |
| Issuer | CFP Board |
| Topic area | Retirement Savings and Income Planning |
| Blueprint weight | 18% |
| Page purpose | Focused sample questions before returning to mixed practice |
Use this page to isolate Retirement Savings and Income Planning for CFP®. Work through the 10 questions first, then review the explanations and return to mixed practice in Securities Prep.
| Pass | What to do | What to record |
|---|---|---|
| First attempt | Answer without checking the explanation first. | The fact, rule, calculation, or judgment point that controlled your answer. |
| Review | Read the explanation even when you were correct. | Why the best answer is stronger than the closest distractor. |
| Repair | Repeat only missed or uncertain items after a short break. | The pattern behind misses, not the answer letter. |
| Transfer | Return to mixed practice once the topic feels stable. | Whether the same skill holds up when the topic is no longer obvious. |
Blueprint context: 18% of the practice outline. A focused topic score can overstate readiness if you recognize the pattern too quickly, so use it as repair work before timed mixed sets.
These questions are original Securities Prep practice items aligned to this topic area. They are designed for self-assessment and are not official exam questions.
Topic: Retirement Savings and Income Planning
Jordan and Elena are reviewing a draft retirement-income projection. Based on the exhibit, which planning action is fully supported?
Exhibit: Retirement-income snapshot
| Item | Value |
|---|---|
| Elena age / FRA | 62 / 67 |
| Elena 2026 earnings | $30,000 part-time |
| Elena pension | $3,600/month from a state university job not covered by Social Security |
| Elena Social Security retirement benefit | $900/month at FRA, before any WEP adjustment |
| Elena years of substantial covered earnings | 22 |
| Jordan Social Security retirement benefit | $2,800/month at FRA |
| Planner draft assumption | Elena can add a spousal benefit on Jordan’s record next year |
| Rule note | GPO reduces Social Security spousal/survivor benefits by 2/3 of a noncovered pension |
Best answer: D
What this tests: Retirement Savings and Income Planning
Explanation: The draft should not rely on Elena receiving a spousal benefit on Jordan’s record. Under the exhibit’s GPO rule, 2/3 of her $3,600 noncovered pension is $2,400, which is more than the maximum spousal benefit implied by Jordan’s $2,800 FRA benefit.
The key concept is the Government Pension Offset. When someone receives a pension from government work that was not covered by Social Security, any Social Security spousal or survivor benefit is reduced by 2/3 of that pension. Here, Elena’s offset is 2/3 of $3,600, or $2,400 per month.
Jordan’s FRA benefit is $2,800, so Elena’s unreduced spousal benefit at FRA would be at most 50% of that, or $1,400 per month, and even less if she claims next year before FRA. Because the offset is larger than the possible spousal benefit, the planner’s draft assumption is not supportable.
Her own worker benefit may still face WEP, and her earnings may matter before FRA, but the exhibit most clearly shows that the projected spousal benefit should be removed.
Two-thirds of Elena’s $3,600 noncovered pension is $2,400, which exceeds any likely spousal benefit based on Jordan’s $2,800 FRA benefit.
Topic: Retirement Savings and Income Planning
Rosa, 63, plans to retire next month from a county job that was not covered by Social Security. Her county pension will be $3,600 per month. SSA estimates her own retirement benefit at $700 per month before any WEP adjustment, and her spousal benefit based on her husband’s record would be $1,200 per month. Her husband, 67, already receives his Social Security retirement benefit. Rosa wants to claim the spousal benefit to avoid IRA withdrawals. She will have no wages after retirement. Which issue is most decisive in recommending against building the plan around a spousal benefit?
Best answer: B
What this tests: Retirement Savings and Income Planning
Explanation: The decisive issue is the government pension offset. Two-thirds of Rosa’s $3,600 noncovered pension is $2,400, which exceeds the quoted $1,200 spousal benefit, so the spousal amount would likely be reduced to zero.
The core concept is matching the Social Security rule to the benefit type under consideration. The government pension offset applies when a client receives a pension from government employment not covered by Social Security and seeks a spousal or survivor benefit; that benefit is generally reduced by two-thirds of the pension. Here, two-thirds of Rosa’s $3,600 pension is $2,400, which is greater than the projected $1,200 spousal benefit, so relying on a spousal claim is not realistic. WEP is a separate issue that may reduce Rosa’s own worker benefit, not the spouse-based benefit she wants to use, and the earnings test does not drive this case because she will have no wages after retirement. The closest distractors involve her own worker benefit, but the recommendation changes because the strategy depends on a spouse-based benefit.
Because two-thirds of her $3,600 noncovered pension is $2,400, the government pension offset would likely eliminate the projected $1,200 spousal benefit.
Topic: Retirement Savings and Income Planning
Elena, 59, hopes to retire at 63, and her spouse Marcus, 57, hopes to retire at 60. They still have a $2,300 monthly mortgage with 8 years remaining and expect to contribute $18,000 a year toward their youngest child’s college costs for the first 4 years of retirement. Marcus will need private health coverage until Medicare begins, and Elena is deciding whether to elect a pension survivor option because they want the surviving spouse to keep the home if one dies early. Before estimating whether they are on track, which assumption approach is most appropriate for the CFP professional to use in the retirement needs analysis?
Best answer: D
What this tests: Retirement Savings and Income Planning
Explanation: A retirement needs analysis should start with realistic after-tax spending assumptions that reflect how expenses change over time. For this couple, mortgage payments, college support, pre-Medicare healthcare, and survivor income needs make a generic replacement ratio too crude to estimate retirement needs accurately.
Retirement needs analysis depends first on estimating the client’s target retirement spending, not on assuming investment returns or plugging in a standard replacement ratio. In this scenario, spending will change by phase: the mortgage continues for 8 years, college support lasts only 4 years, private health coverage is needed until Medicare, and the survivor may need enough income to keep the home. The CFP professional should therefore build an after-tax cash-flow assumption by phase, then test it against pension elections, Social Security, taxes, inflation, longevity, and portfolio assets. A flat percentage of pre-retirement income would ignore the couple’s temporary and survivor-specific obligations. The key takeaway is that a detailed spending assumption is the foundation for the rest of the retirement projection.
Phased after-tax spending assumptions best capture their changing retirement cash needs, including mortgage, college, healthcare, and survivor obligations.
Topic: Retirement Savings and Income Planning
Melissa, age 54, owns a manufacturing firm with 14 employees. She wants to boost retirement savings before retiring at 65 and likes the idea of large deductible contributions. However, her firm’s profits swing widely with project-based contracts, and she does not want a plan that could force large employer contributions in weak years. She is choosing between a profit-sharing 401(k) and a cash balance defined benefit plan. Which client constraint is most decisive in favoring a profit-sharing 401(k) over a cash balance defined benefit plan?
Best answer: C
What this tests: Retirement Savings and Income Planning
Explanation: The deciding issue is contribution flexibility. A profit-sharing 401(k) can let the employer reduce or skip employer contributions in weak years, while a cash balance defined benefit plan is generally better suited to businesses that can support ongoing funding commitments.
This comparison turns on the difference between a defined contribution plan with discretionary employer funding and a defined benefit plan with more rigid funding expectations. Melissa’s wish to save more and deduct contributions is important, but her uneven business cash flow and stated unwillingness to be locked into large employer contributions are more decisive. A profit-sharing 401(k) preserves flexibility because employer contributions can vary by year, subject to plan rules. By contrast, a cash balance defined benefit plan is usually most appropriate when the owner has stable earnings and can reliably support required contributions over time. The key takeaway is that liquidity and funding flexibility can outweigh the appeal of higher potential contributions.
A profit-sharing 401(k) allows discretionary employer contributions, while a cash balance defined benefit plan generally requires more consistent funding.
Topic: Retirement Savings and Income Planning
Maria, 58, owns a consulting practice with no employees other than her spouse. Annual profits have ranged from $90,000 to $350,000, and in weaker years she may need to conserve cash for operating costs and equipment. Her CPA notes that a cash balance plan could allow much larger deductible retirement contributions than a SEP IRA. If Maria values the ability to reduce or skip contributions in lean years more than maximizing annual contributions, which action best aligns with that priority?
Best answer: D
What this tests: Retirement Savings and Income Planning
Explanation: When business income is uneven, retirement plan choice should reflect liquidity needs as well as tax benefits. A SEP IRA gives Maria discretion to contribute less or nothing in a down year, so it better matches her stated priority than a higher-capacity plan built around more consistent funding.
Choosing a business retirement plan means matching plan design to the client’s cash-flow reality. Maria’s most important fact is not that a cash balance plan can shelter more income; it is that her profits are volatile and she may need to preserve business liquidity in some years. A SEP IRA is generally better when funding flexibility is the priority because employer contributions are discretionary each year. By contrast, plans designed for very high contribution potential are best when the owner can reliably support ongoing funding.
The closest trap is choosing the highest deductible option even though the client’s real constraint is flexibility.
A SEP IRA best fits variable business cash flow because contributions are discretionary each year, unlike the stronger ongoing funding expectations of a cash balance plan.
Topic: Retirement Savings and Income Planning
Jordan, age 34, is deciding whether to make this year’s IRA contribution to a Roth IRA or a fully deductible traditional IRA. Because Jordan left a high-paying job midyear to start a business, she is in the 12% federal bracket this year but expects to be back in the 24% bracket within two years. She expects retirement income from a frozen pension, Social Security, and required minimum distributions from pretax accounts, can pay current tax from cash flow, and plans to contribute the maximum IRA amount either way. Which contribution approach is best supported by these facts?
Best answer: B
What this tests: Retirement Savings and Income Planning
Explanation: Roth contributions are favored when the client is in an unusually low marginal bracket now and expects a higher marginal rate later. Jordan’s 12% year appears temporary, while future earnings, pension income, and pretax-account distributions point to higher future taxation, and Jordan does not need a current deduction.
The core comparison between Roth and traditional contributions is the marginal tax rate paid now versus the marginal tax rate likely to apply when funds are withdrawn. Jordan is in a temporary 12% bracket, expects to return to 24%, and also expects taxable retirement income from a frozen pension, Social Security, and required minimum distributions. Those facts support paying tax at today’s lower rate through a Roth contribution rather than taking a small current deduction and likely paying more later. Jordan can also pay the current tax from cash flow, so the full IRA contribution stays invested. A split approach can be useful when future tax rates are genuinely unclear, but these facts point more clearly toward Roth.
Roth contributions fit best because Jordan can pay tax during a temporary 12% year and expects higher taxable income later.
Topic: Retirement Savings and Income Planning
Elena, 64, wants more freedom but is not ready for a full stop. She enjoys mentoring, dislikes heavy travel, and her employer will let her move to a 3-day schedule for one year while keeping group health coverage. If she retires now, she will need individual health insurance until Medicare and larger portfolio withdrawals during a down market. Which recommendation best aligns with sound retirement-transition planning?
Best answer: C
What this tests: Retirement Savings and Income Planning
Explanation: A phased retirement is most appropriate when a client can reduce work instead of stopping abruptly and that change improves multiple planning areas at once. Here, it bridges the health-insurance gap, lowers portfolio pressure in a down market, and lets Elena adjust gradually to retirement.
Phased retirement is often the better choice when a client is not fully ready for a hard stop and continued part-time work meaningfully improves the plan. Here, Elena has an available reduced schedule, still values part of her work, and gains two clear financial advantages from staying partially employed for one year: employer health coverage until Medicare and less need to draw from her portfolio during a down market. That makes the transition both behaviorally easier and financially cleaner. A hard stop would force several risks at once, including higher near-term insurance costs and greater sequence-of-returns pressure. The best recommendation is the one that matches her preferences while preserving flexibility.
Phased retirement best fits because it preserves employer coverage, reduces near-term withdrawals, and matches Elena’s desire for a gradual transition.
Topic: Retirement Savings and Income Planning
Jordan and Priya, both age 52, ask their CFP professional for a first-pass retirement projection at age 65. Based on the case file, which planning action is fully supported?
Exhibit: Retirement plan snapshot
| Participant | Plan | Key details |
|---|---|---|
| Jordan | Current employer 401(k) | Balance $620,000; contributes 10%; 4% match |
| Jordan | Former employer cash balance pension | Vested; statement shows hypothetical account value $185,000 and life annuity at 65 of $1,150/month |
| Priya | City government 457(b) | Balance $240,000; contributes 8%; no employer match |
Best answer: A
What this tests: Retirement Savings and Income Planning
Explanation: The exhibit shows three different retirement plan types. Jordan’s cash balance pension is still a defined benefit plan even though it displays a hypothetical account value, while the 401(k) and Priya’s governmental 457(b) are account-based plans suitable for asset projections.
A cash balance plan often looks like an account, but legally it is a defined benefit pension sponsored and funded by the employer. Because the exhibit already provides a life annuity estimate at age 65, it is reasonable to include that benefit in a retirement-income projection as pension income. By contrast, Jordan’s 401(k) and Priya’s city-government 457(b) are account-based arrangements, so their retirement contribution depends on balances, future contributions, growth, and withdrawal assumptions. Government sponsorship of the 457(b) does not turn it into a defined benefit plan. The key takeaway is to sort plans by structure first: pension-style benefits for defined benefit plans, and account-value modeling for defined contribution-style plans.
A cash balance plan is a defined benefit plan despite its account-style statement, while the 401(k) and governmental 457(b) are account-based plans.
Topic: Retirement Savings and Income Planning
Martin, 65, will retire next month. His spouse, Dana, 58, works full time and can add Martin to her employer health plan. Martin asks whether he should delay Medicare Part B and use Dana’s plan for two years. Assume that if Dana’s plan is based on current active employment at an employer with 20 or more employees, that plan is generally primary for Martin; otherwise Medicare is generally primary. Before advising, which clarification matters most?
Best answer: C
What this tests: Retirement Savings and Income Planning
Explanation: The key clarification is whether Martin has qualifying employer-based coverage through Dana’s current employment at an employer large enough for that plan to be primary. That determines whether delaying Medicare Part B is potentially appropriate or could leave him exposed to coverage gaps and penalties.
Before giving guidance on Medicare enrollment timing, the CFP professional should first verify the fact that controls coordination of benefits: whether the client is covered under a spouse’s current active-employment group plan and whether that employer is large enough for the group plan to be primary. If that condition is not met, Medicare is generally primary, so delaying Part B can create uncovered claims and late-enrollment consequences. This is a good CFP-level example of clarifying the decision-critical fact before discussing cost, plan preferences, or broader retirement-income issues. Income-related premiums and future plan design choices matter, but only after confirming whether delaying enrollment is even safe and appropriate under the client’s coverage arrangement.
That fact determines whether Martin may be able to delay Part B without creating a primary coverage problem or late-enrollment risk.
Topic: Retirement Savings and Income Planning
A CFP professional is advising Ava, 44, who owns an S corporation with four employees. She wants a retirement arrangement she can start quickly, keep administration simple, let employees contribute from their own pay, and limit the employer commitment to a predictable modest amount. Ava also has $180,000 in a former employer’s 401(k), is in a high tax bracket, and likes the idea of Roth tax-free income later. Which client objective is most decisive in recommending a SIMPLE IRA for the business?
Best answer: D
What this tests: Retirement Savings and Income Planning
Explanation: The decisive factor is Ava’s desire to let employees contribute from pay while keeping the employer obligation modest and administration simple. That combination points to a SIMPLE IRA, while SEP, Roth, traditional, and rollover IRAs serve different planning purposes.
The core distinction is that a SIMPLE IRA is a small-employer retirement arrangement built around employee salary deferrals plus a limited employer contribution. In Ava’s case, the employee-deferral feature and predictable employer cost are more important than her high tax bracket or her interest in tax-free Roth income. A SEP IRA is often better when the owner wants flexible, employer-only contributions and the ability to contribute more in strong-profit years, but it does not give employees their own salary-deferral feature. Traditional and Roth IRAs are personal IRAs with much lower contribution capacity and do not solve the firm’s workplace-plan need. Her old 401(k) may still be moved to a rollover IRA, but that is a separate planning decision from selecting the business retirement arrangement. The closest distractor is the SEP-oriented contribution-flexibility goal.
A SIMPLE IRA is designed for small employers that want employee elective deferrals with relatively simple administration and modest required employer contributions.
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