U1 Flashcards
Connie was born in 1968. She is an engineering consultant and earns more than $90,000 per year. She saves very little money because she prefers to spend it on a luxurious apartment, clothes, travel and exclusive clubs. The thought of saving for her old age has never entered Connie’s head. She believes that the government will provide for her when she is too old to work, just as the Old Age Security system provided for her parents. Unless Connie uses the services of a good financial planner or starts saving hard and fast, she is in for an unpleasant surprise when she becomes too old to work. All of the following are true, EXCEPT:
Connie is a member of the baby boom.
Which of the following statements is TRUE with respect to the Canadian government’s retirement programs?
During the first half of the 21st century, the CPP program as it was structured in 1966 would experience a significant decrease in funds because there will be fewer citizens in the work force and more citizens eligible for pensions than ever before.
Between 2017 and 2046, it is estimated that 24% of the population will be over 65 years of age and there will only be 2.6 workers to make contributions for every eligible recipient. When the CPP program was first developed, only 10% of the population qualified for benefits and there were 6 to 7 workers contributing for every eligible person.
John, a CFP® professional, is preparing a plan for his client, Shirley. She is aged 50 and single. She wants to retire at age 55 and be able to maintain her current standard of living. John has gathered information on her needs and resources. He has prepared a savings plan that indicates that she needs to save 1,800% of her income each year. What step of the financial planning process does John need to address now?
establish objectives and gather data
Jerry, a CFP® professional, has been engaged to prepare a retirement plan for his client, Arana. She is aged 50 and single. She wants him to invest the $150,000 in her RRSP in high-tech stocks to duplicate the 1,400% annual return that her nephew, Arvi earned last month trading on the NASDAQ. Jerry has very little information on her needs and resources. He has prepared a savings plan that indicates that she does not need to save any of her income if she can earn 1,400% per year. What step of the financial planning process does Jerry need to now take?
establish objectives and gather data
Which of the couples best demonstrates the fundamental concepts of successful personal financial planning, wealth accumulation and retirement planning?
The Alings, who began to save and invest money strategically when they were in their early 30s with the objective of retiring at age 60.
For the past five years, Percival has operated a thriving financial planning practice specializing in education planning. However, his client population is aging and business is declining. He believes that he should expand his services to include retirement planning. All of the following beliefs are true, EXCEPT:
Percival can develop one generic retirement planning package to suit all of his clients.
Randy, a CFP® professional, has been engaged to prepare a retirement plan for his client, Moira. She is 50 years old and single. She has thought through, and established very specific and practical retirement objectives. She wants to retire at age 55 and continue some part-time work earning about $15,000 per year. Moira will accept whatever standard of living that she can maintain, but expects to live to about age 90. She has given Randy a copy of her detailed objectives. Randy has no other information on her needs and resources. He has prepared a savings plan that indicates that Moira needs to save 10% of her income each year. What step of the financial planning process should Randy address next?
establish objectives and gather data
Dan, a CFP® professional, has been engaged to prepare a retirement plan for his client Natalie. She is 50 years old and single and has developed very specific and practical retirement objectives. Dan has gathered a significant amount of information about her financial situation, lifestyle, spending patterns, health issues etc. What step of the retirement planning process should Dan deal with next?
clarify present status and identify problem areas and opportunities
Myrna is a financial planner. She is currently developing a retirement plan for the Breithaupts and she is reviewing Statistic Canada’s information on interest rates and inflation rates over the past five years. She is also reading The Financial Post to get a sense of what these rates are expected to do over the next three years. With respect to the retirement planning process, at which stage is Myrna?
identify appropriate strategies and present the plan
Vern, a CFP® professional, has been engaged to prepare a retirement plan for his client, Mona. She is 50 years old and single, and earns about $82,000 per year. Mona has completed Vern’s questionnaire that asks for very specific and practical retirement objectives. She has completed his questionnaire that details information on all of her needs and resources. Vern has prepared and presented a savings plan that shows that Mona will need to maximize her RRSP contributions and save another $6,600 per year. What step of the financial planning process should Vern deal with next?
implement the plan
Marm, a CFP® professional, has been engaged to prepare a retirement plan for her client, Rich. He is 50 years old and married, and earns about $72,000 per year. Rich has completed Marm’s questionnaire that asks for very specific and practical retirement objectives. He has completed her questionnaire that details information on all of his and his wife’s needs and resources. Marm has prepared a savings plan that shows that Rich cannot retire until age 84. What step of the financial planning process should Marm address next?
clarify present status and identify problem areas and opportunities
Tai has just finished preparing a retirement savings plan for his client, Mika, who is 35 years old. What assumption is likely to be the most vulnerable point of the plan?
the rate of inflation
Estimating the rate of inflation and the future rate of return on investments are two of the most difficult parts of retirement planning, particularly since the actual rates will change over the course of a long planning period.
Matt, who specializes in retirement planning, has just informed his clients that they will not be able to meet their retirement goals based on their current level of savings. What option should Matt NOT encourage his clients to consider?
increasing their reliance on government-sponsored pension programs
Klare has operated a successful accounting business out of his home for the past 30 years but, he has decided it is now time to retire. What is the biggest financial change that Klare will LIKELY experience at retirement?
loss of regular employment income
You are holding retirement planning meetings with Chris and Martin, who are in their forties. They insist that the most important thing in their retirement is to be financially secure. You tell them this is not precise enough and start to discuss their plans. At this point, you are in which step of the retirement planning process?
establish objectives and gather data
The objectives provide a destination, help prepare the client psychologically for retirement, and act as motivators to change current lifestyle patterns.
% CA male and female popu cont work beyond age 65?
21% and 11%
