Question 1
Identify three current trends in retirement planning. (There are 4 discussed)
CORRECT 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
Question 2
Discuss challenges associated with the shift from defined benefit to defined contribution
plans
CORRECT 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
Question 3
Identify the seven steps of the retirement planning process.
CORRECT ANSWER
1. understanding the client's personal and financial circumstances
2. identifying and selecting goals
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@THE STUDY VAULT
, 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
Question 4
Identify and describe the three key components of a statement of financial position
CORRECT 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.
Question 5
Describe the cash flow statement and the equation that defines it.
CORRECT 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)
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@THE STUDY VAULT
,Question 6
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
CORRECT 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
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@THE STUDY VAULT
, 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.
Question 7
What two qualities should retirement goals have to make them useful in planning?
CORRECT 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
Question 8
Why is it important for clients to have goals after they retire?
CORRECT 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?
Question 9
What are "income replacement percentages"
CORRECT 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
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@THE STUDY VAULT
Identify three current trends in retirement planning. (There are 4 discussed)
CORRECT 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
Question 2
Discuss challenges associated with the shift from defined benefit to defined contribution
plans
CORRECT 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
Question 3
Identify the seven steps of the retirement planning process.
CORRECT ANSWER
1. understanding the client's personal and financial circumstances
2. identifying and selecting goals
1
@THE STUDY VAULT
, 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
Question 4
Identify and describe the three key components of a statement of financial position
CORRECT 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.
Question 5
Describe the cash flow statement and the equation that defines it.
CORRECT 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)
2
@THE STUDY VAULT
,Question 6
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
CORRECT 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
3
@THE STUDY VAULT
, 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.
Question 7
What two qualities should retirement goals have to make them useful in planning?
CORRECT 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
Question 8
Why is it important for clients to have goals after they retire?
CORRECT 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?
Question 9
What are "income replacement percentages"
CORRECT 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
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@THE STUDY VAULT
