CFP Benchmarks

Question 1

Life Insurance

Answer 1

RISKS

10-16x gross pay

Question 2

Health Insurance

Answer 2

RISKS

$1 million lifetime cap pre-Affordable Care Act. ACA eliminated per illness or lifetime caps

Question 3

Disability

Answer 3

RISKS

60-70% gross pay

Question 4

Property: Home and Auto

Answer 4

RISKS

Insured less than or equal to FMV

Question 5

Long-Term Care (inflation protection)

Answer 5

RISKS

36-60 months

Question 6

PLUP
Personal Liability Umbrella Policy

Answer 6

RISKS

$1-3M

Question 7

Emergency Fund

Answer 7

SHORT-TERM

3-6 months
(Current Assets/Monthly Non-Discretionary Cash Flows)

Question 8

Housing Ratio 1
Housing Ratio 2

Answer 8

SHORT-TERM

28%

36%

Question 9

Debt Analysis

Answer 9

SHORT-TERM

Good - Bad - Reasonable

Question 10

Education Funding

Answer 10

LONG-TERM

$3,000 / 6,000 / 9,000 per child per year for 18 years
Public / Semi-Private / Competitive-Private

Question 11

Retirement

Answer 11

LONG-TERM

NPV of goals
16x Pre-Retirement Income
Savings Rate 10-12%
Return (8-10% expected)
Risk (8-14%)

Question 12

Legacy

Answer 12

LONG-TERM

Will
Durable Power of Attorney for Healthcare
Advanced Medical Directive

Question 13

Good Debt vs. Bad Debt vs. Reasonable

Answer 13

Any time the useful life of the asset far exceeds the term of the debt

Ex: 15 year mortgage or 3 yr car loan

Reasonable debt: 30 yr mortgage, 5 yr care loan

Bad debt: Credit card

Question 14

Expected return on investments

Answer 14

8-10%

Question 15

Benchmark standard deviation of a diversified portfolio

Answer 15

8-14%

Question 16

Consumer debt payment should not exceed ___% of NET income

Answer 16

Consumer debt payment should not exceed ___% of NET income