2025 CRPC ACTUAL EXAM ANSWERS|COMPLETE
ANSWERES WITH RATIONALE| SCORE A
Bill and Lisa Hahn have determined that they will need a monthly income of
$6,000 during retirement. They expect to receive Social Security retirement
benefits amounting to $3,500 per month at the beginning of each month. Over the
12 remaining years of their preretirement period, they expect to generate an
average annual after-tax investment return of 8%; during their 25-year retirement
period, they want to assume a 6% annual after-tax investment return
compounded monthly. They want to start their monthly retirement withdrawals on
the first day they retire.
What is the lump sum needed at the beginning of retirement to fund this income
stream?
The monthly retirement income need is not specified as "today's dollars," and no
inflation rate specified; therefore, it must be assumed that the $2,500 net monthly
income need represents retirement dollars, and the retirement period income stream is
level. To calculate the lump sum needed at the beginning of retirement, discount the
stream of monthly income payments at the investment return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
,Chris and Eve Bronson have analyzed their current living expenses and
estimated their retirement income need, net of expected Social Security benefits,
to be $90,000 in today's dollars. They are confident that they can earn a 7% after-
tax return on their investments, and they expect inflation to average 4% over the
long term.
Determine the lump sum amount the Bronsons will need at the beginning of
retirement to fund their retirement income needs, using the worksheet below.
(1) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods until
retirement4%% inflation rateFuture value of income deficit in first retirement
year$239,925
(2) Determine retirement fund needed to meet income deficit:$239,925payment
(future value of income deficit in first retirement year)30number of periods in
retirement
The lump sum needed at the beginning of the
This PVAD calculation requires that the calculator be set for beginning-of-period
payments. First, the annual retirement income deficit is expressed in retirement-year-
one dollars, resulting in a $239,925 income deficit in the first retirement year. This
income deficit grows with inflation over the 30-year retirement period, and the retirement
fund earns a 7% return.
The calculator inputs are
$239,925, [PMT];
30, [N];
2.8846, [I/YR]. (1.07/1.04)-1 x100
Solve for [PV],
to determine the retirement fund that will generate this income stream. If you enter
2.8846 directly into the calculator, you will get $4,911,265. If you use the equation to
compute I/YR, and then hit the I/YR button you will get $4,911,256. Either way the
answer is clear. The difference is that when you calculate the I/YR, the calculator takes
the interest rate out to nine decimal places. If you enter in the 2.8846, then the
calculator only takes the interest rate to four decimal places.
LO 1-4
,John was killed in a car accident at age 45. His wife Lottie, age 40, is the primary
beneficiary of his retirement account at work and his IRA. Thanks to you, John
had sufficient life insurance, so there does not seem to be any immediate need
for Lottie to take withdrawals from John's retirement assets. You and Lottie
discuss her options for titling her inherited retirement accounts. Which of the
following would give Lottie the most flexibility for tax-efficient distributions from
John's retirement assets?
A)
Move all of John's assets into an inherited IRA titled John Q. Jones (deceased
July 4, 202X) FBO Lottie S. Jones
B)
Move John's money into Lottie's IRA and then use the entire account to pay off
their home mortgage
C)
Move some of John's money into Lottie's current IRA and place the rest into an
inherited IRA titled John Q. Jones (deceased July 4, 202X) FBO Lottie S. Jones
D)
Consolidate all of John's retiremen
C
One advantage of placing retirement assets into an inherited IRA is that no withdrawal
for any reason would ever be subject to the 10% early withdrawal penalty (EWP)
because it would always be coded as a withdrawal due to a death. That means Lottie
would have access to this money without the 10% EWP but she would have to start
RMDs when John would have been 72. A potential advantage of moving retirement
money inherited from a spouse into the surviving spouse's own name is that the
surviving spouse would be treated as the original owner for the start of RMDs. In this
case, Lottie is five years younger than John. Thus, moving money into her name would
give her five more years before facing RMDs. If this IRA was worth $250,000 when
John would have been 73 and it grew at 6% for five years, it would be worth about
$335,000 when Lottie reached 73. However, withdrawals from an account in her own
name would be subject to the 10% EWP until Lottie reached 59½ unless the withdrawal
met another exception. Thus, the most flexibility for Lottie would be moving some into
each type of IRA. The more access she might need, the more would go into the
inherited account. The more she wanted to delay RMDs, the more would come under
her name.
LO 7-4
, This year, Irwin sold several securities that left him with the following types of
gains and losses: long-term capital gain-$18,000, short-term capital gain-$11,800,
long-term capital loss-$12,200, and short-term capital loss-$12,000.
What is the net capital gain or loss on Irwin's security sales?
A)
net long-term loss of $24,200
B)
net long-term losses can be written off up to $5,000/year with any remaining
losses carried forward to the next year
C)
net long-term gain of $5,600
D)
net long-term gain of $5,600 and net short-term gain of $80
C
The long-term gain and loss are netted, leaving a long-term gain of $5,800. Short-term
gains and losses are netted, leaving a short-term loss of $200. Because there is a
positive and a negative, these are again netted to leave a net long-term capital gain of
$5,600. Net long-term losses can offset ordinary income up to $3,000/year with any
remaining losses carried forward to the next year.
BRACKET MATH
LO 8-1
Dan died at age 69. His beneficiary was his son Robert, age 44. Robert has come
to you to ask about his required minimum distribution (RMD) options. Which of
the following would be acceptable RMD options for Robert?
1. Robert must begin distributions in the year following the year Dan died.
2. Robert can move Dan's account into an inherited IRA. He must begin taking
RMDs in the year following the year Dan died based on Robert's life expectancy in
the year following the year of death and then reduced by 1 for each subsequent
year.
3. Robert's only requirement is to have the account totally distributed by
December 31 of the year with the 10th anniversary of Dan's death.
4. Robert will have no mandatory RMDs until the 10th year after Dan's death.
ANSWERES WITH RATIONALE| SCORE A
Bill and Lisa Hahn have determined that they will need a monthly income of
$6,000 during retirement. They expect to receive Social Security retirement
benefits amounting to $3,500 per month at the beginning of each month. Over the
12 remaining years of their preretirement period, they expect to generate an
average annual after-tax investment return of 8%; during their 25-year retirement
period, they want to assume a 6% annual after-tax investment return
compounded monthly. They want to start their monthly retirement withdrawals on
the first day they retire.
What is the lump sum needed at the beginning of retirement to fund this income
stream?
The monthly retirement income need is not specified as "today's dollars," and no
inflation rate specified; therefore, it must be assumed that the $2,500 net monthly
income need represents retirement dollars, and the retirement period income stream is
level. To calculate the lump sum needed at the beginning of retirement, discount the
stream of monthly income payments at the investment return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
,Chris and Eve Bronson have analyzed their current living expenses and
estimated their retirement income need, net of expected Social Security benefits,
to be $90,000 in today's dollars. They are confident that they can earn a 7% after-
tax return on their investments, and they expect inflation to average 4% over the
long term.
Determine the lump sum amount the Bronsons will need at the beginning of
retirement to fund their retirement income needs, using the worksheet below.
(1) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods until
retirement4%% inflation rateFuture value of income deficit in first retirement
year$239,925
(2) Determine retirement fund needed to meet income deficit:$239,925payment
(future value of income deficit in first retirement year)30number of periods in
retirement
The lump sum needed at the beginning of the
This PVAD calculation requires that the calculator be set for beginning-of-period
payments. First, the annual retirement income deficit is expressed in retirement-year-
one dollars, resulting in a $239,925 income deficit in the first retirement year. This
income deficit grows with inflation over the 30-year retirement period, and the retirement
fund earns a 7% return.
The calculator inputs are
$239,925, [PMT];
30, [N];
2.8846, [I/YR]. (1.07/1.04)-1 x100
Solve for [PV],
to determine the retirement fund that will generate this income stream. If you enter
2.8846 directly into the calculator, you will get $4,911,265. If you use the equation to
compute I/YR, and then hit the I/YR button you will get $4,911,256. Either way the
answer is clear. The difference is that when you calculate the I/YR, the calculator takes
the interest rate out to nine decimal places. If you enter in the 2.8846, then the
calculator only takes the interest rate to four decimal places.
LO 1-4
,John was killed in a car accident at age 45. His wife Lottie, age 40, is the primary
beneficiary of his retirement account at work and his IRA. Thanks to you, John
had sufficient life insurance, so there does not seem to be any immediate need
for Lottie to take withdrawals from John's retirement assets. You and Lottie
discuss her options for titling her inherited retirement accounts. Which of the
following would give Lottie the most flexibility for tax-efficient distributions from
John's retirement assets?
A)
Move all of John's assets into an inherited IRA titled John Q. Jones (deceased
July 4, 202X) FBO Lottie S. Jones
B)
Move John's money into Lottie's IRA and then use the entire account to pay off
their home mortgage
C)
Move some of John's money into Lottie's current IRA and place the rest into an
inherited IRA titled John Q. Jones (deceased July 4, 202X) FBO Lottie S. Jones
D)
Consolidate all of John's retiremen
C
One advantage of placing retirement assets into an inherited IRA is that no withdrawal
for any reason would ever be subject to the 10% early withdrawal penalty (EWP)
because it would always be coded as a withdrawal due to a death. That means Lottie
would have access to this money without the 10% EWP but she would have to start
RMDs when John would have been 72. A potential advantage of moving retirement
money inherited from a spouse into the surviving spouse's own name is that the
surviving spouse would be treated as the original owner for the start of RMDs. In this
case, Lottie is five years younger than John. Thus, moving money into her name would
give her five more years before facing RMDs. If this IRA was worth $250,000 when
John would have been 73 and it grew at 6% for five years, it would be worth about
$335,000 when Lottie reached 73. However, withdrawals from an account in her own
name would be subject to the 10% EWP until Lottie reached 59½ unless the withdrawal
met another exception. Thus, the most flexibility for Lottie would be moving some into
each type of IRA. The more access she might need, the more would go into the
inherited account. The more she wanted to delay RMDs, the more would come under
her name.
LO 7-4
, This year, Irwin sold several securities that left him with the following types of
gains and losses: long-term capital gain-$18,000, short-term capital gain-$11,800,
long-term capital loss-$12,200, and short-term capital loss-$12,000.
What is the net capital gain or loss on Irwin's security sales?
A)
net long-term loss of $24,200
B)
net long-term losses can be written off up to $5,000/year with any remaining
losses carried forward to the next year
C)
net long-term gain of $5,600
D)
net long-term gain of $5,600 and net short-term gain of $80
C
The long-term gain and loss are netted, leaving a long-term gain of $5,800. Short-term
gains and losses are netted, leaving a short-term loss of $200. Because there is a
positive and a negative, these are again netted to leave a net long-term capital gain of
$5,600. Net long-term losses can offset ordinary income up to $3,000/year with any
remaining losses carried forward to the next year.
BRACKET MATH
LO 8-1
Dan died at age 69. His beneficiary was his son Robert, age 44. Robert has come
to you to ask about his required minimum distribution (RMD) options. Which of
the following would be acceptable RMD options for Robert?
1. Robert must begin distributions in the year following the year Dan died.
2. Robert can move Dan's account into an inherited IRA. He must begin taking
RMDs in the year following the year Dan died based on Robert's life expectancy in
the year following the year of death and then reduced by 1 for each subsequent
year.
3. Robert's only requirement is to have the account totally distributed by
December 31 of the year with the 10th anniversary of Dan's death.
4. Robert will have no mandatory RMDs until the 10th year after Dan's death.
