CRPC ALL Already Passed
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
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
