Are you preparing for the CFP® exam? Are you not able to cope with the questions on retirement saving and income planning? Disappointed due to scoring lower than expected due to avoidable errors or simple mistakes? Don’t worry, because regular practice of CFP® exam test questions can be the key to avoiding such pitfalls and improving your overall performance.
Developing a strong understanding of retirement planning concepts and strategies with practice can help you to learn to assess retirement needs based on various factors, including desired lifestyle, life expectancy, inflation, healthcare costs, and unexpected expenses. In this blog, we will explore the 10 CFP® exam questions tailored to the subject of retirement saving and income planning. Discover how incorporating regular MCQ practice into your study routine can make a significant difference in your exam preparation, helping you achieve better results and minimize costly errors.
Q 1. Which of the following is not a criteria that an employee must meet in order to be eligible for a SEP Plan?
A. The employee must be at least 21 years old
B. The individual must have spent at least three of the preceding five years working for the company
C. The employee must be self-employed
D. For the tax year, the employee must have received at least $650 in compensation
Q 2. What type of plan is best suited for companies with unstable cash flows?
A. Target benefit plan
B. Salary reduction plan
C. Informally funded benefit plan
D. Profit sharing plan
Q 3. Which of the following statements about the early withdrawal penalty from a SIMPLE IRA is/are correct? (1) Early withdrawals are subject to a 20% penalty if the withdrawals are made during the first two years of plan participation. (2) After the initial two-year period, early withdrawals from a SIMPLE IRA are subject to a 10% penalty.
A. (l) only
B. (2) only
C. None of the above
D. All of the above
Q 4. If an individual under the age of 65 takes a distribution from a health savings account (HSA), and the distribution is not utilized to pay for qualified medical expenditures, which of the following will happen?
A. The distribution is subject to ordinary income tax only
B. The distribution is subject to ordinary income tax and a 20% penalty
C. The distribution is subject to ordinary income tax and a 15% penalty
D. None of the above are correct
Q 5. Which of the following criteria must an individual meet in order to be called a key employee? (1) 5% owner (2) 1% owner with compensation exceeding $105,000 (3) An executive of the company with compensation exceeding $150,000 (4) An officer of the company with compensation exceeding $200,000
A. (2) and (3) only
B. (l) and (4) only
C. (l), (2), and (3) only
D. (l), (2), and (4) only
Q 6. Which of the following will decrease an employer’s contribution to a defined benefit plan? (1) High ratio of married to unmarried participants (2) Large forfeitures (3) Lower than expected investment returns (4) High turnover among employees
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (2) and (4) only
Q 7. Which of the following are excluded from the IRA’s 10% early withdrawal penalty? (1) Hardship withdrawals (2) Higher education expenses for a participant’s child (3) First-time home purchase up to $10,000 (4) Loan for qualified education expenses
A. (1) and (4) only
B. (2) and (3) only
C. (1), (2), and (3) only
D. All of the above
Q 8. Luka is a member of his company’s defined benefit plan. How much life insurance on Luka’s life may the plan trustee seek for if his expected retirement income is $850 per month?
Q 9. Wade, a Vice President at Beta Corporation, earns $450,000 in 2022. How much can the firm contribute on his behalf if the corporation has implemented a 15% money purchase plan?
Q 10. Linda, 43, is the owner of a successful small Axe company. She’s thinking about switching to a qualified plan to achieve her two main aims of increasing payments for herself and key staff while also allowing for some flexibility in case of financial difficulties. Which of the following would best meet all of her goals?
A. SIMPLE plan
B. Target benefit plan
C. Profit sharing plan
D. 457 deferred compensation plans
Regular practice of CFP® exam questions is the key to success. By consistently engaging in MCQ practice, you can improve your understanding, minimize laughable blunders, and score more in the CERTIFIED FINANCIAL PLANNER™ exam mock tests and in the real exam. Don’t underestimate the power of practice in your exam preparation—it can make a significant difference in your performance and help you achieve your goal of becoming a successful financial professional. To uplevel your preparation, subscribe to CFP® Exam Prep App by Achieve.