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
Which of the following vesting schedules is permitted for employer matching contributions in a 401(k) plan (non-safe harbor)?
Solution
B is correct.
For employer matching contributions in a 401(k) plan, the two permitted vesting schedules are: 3-year cliff vesting (100% after 3 years) or 2-to-6-year graded vesting (20% per year starting in year 2, reaching 100% after 6 years). 2-to-6-year graded vesting is one of the two permitted schedules. Note that employer profit-sharing contributions may use either 3-year cliff or 2-to-6-year graded vesting as well. Safe harbor contributions must be 100% immediately vested.
For employer matching contributions in a 401(k) plan, the two permitted vesting schedules are: 3-year cliff vesting (100% after 3 years) or 2-to-6-year graded vesting (20% per year starting in year 2, reaching 100% after 6 years). 2-to-6-year graded vesting is one of the two permitted schedules. Note that employer profit-sharing contributions may use either 3-year cliff or 2-to-6-year graded vesting as well. Safe harbor contributions must be 100% immediately vested.
Question 2
Medium
Sequence-of-returns risk is most damaging to a retirement portfolio under which specific condition?
Solution
B 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
Which of the following plans is generally required to file Form 5500 with the Department of Labor annually?
Solution
C is correct.
Form 5500 must be filed annually for most ERISA-covered employee benefit plans. Plans with 100 or more participants are considered large plans and must file the full Form 5500 (often with an independent audit).
Form 5500 must be filed annually for most ERISA-covered employee benefit plans. Plans with 100 or more participants are considered large plans and must file the full Form 5500 (often with an independent audit).