Free CFP Exam Retirement Savings and Income Planning Practice Questions
Retirement savings and income planning on the CFP exam covers qualified plans (401(k), 403(b), defined benefit), Social Security optimization, retirement income distribution strategies, and retirement readiness analysis (CFP Board).
Sample Questions
Question 1
Easy
What is the maximum percentage of compensation an employer may contribute to a SEP IRA for an employee in 2026?
Solution
B is correct.
An employer may contribute up to 25% of an employee's compensation to a SEP IRA, subject to a maximum dollar limit of $72,000 in 2026.
An employer may contribute up to 25% of an employee's compensation to a SEP IRA, subject to a maximum dollar limit of $72,000 in 2026.
Question 2
Medium
Sequence-of-returns risk is most damaging to a retirement portfolio under which specific condition?
Solution
A is correct.
Sequence-of-returns risk is most severe when large losses occur early in the distribution phase because withdrawals lock in those losses permanently, leaving fewer assets to benefit from later recoveries.
Sequence-of-returns risk is most severe when large losses occur early in the distribution phase because withdrawals lock in those losses permanently, leaving fewer assets to benefit from later recoveries.
Question 3
Hard
A school district employee participates in a governmental 457(b) plan. She is considering taking a distribution at age 50 after separating from service. Which statement is correct?
Solution
B is correct.
A key advantage of 457(b) plans is that distributions taken after separation from service are not subject to the 10% early withdrawal penalty under IRC Section 72(t), regardless of the participant's age. Distributions are included in gross income and taxed as ordinary income, but no penalty applies. This distinguishes 457(b) plans from 401(k) and 403(b) plans.
A key advantage of 457(b) plans is that distributions taken after separation from service are not subject to the 10% early withdrawal penalty under IRC Section 72(t), regardless of the participant's age. Distributions are included in gross income and taxed as ordinary income, but no penalty applies. This distinguishes 457(b) plans from 401(k) and 403(b) plans.