Chapter 2
PLANNING FOR RETIREMENT NEEDS
LEARNING OBJECTIVES:
A. Have a basic understanding of retirement income needs
B. Identify key aspects of retirement needs analysis
REVIEW:
This chapter discusses planning for retirement income needs. The chapter
begins with a summary of income and other financial needs such as estate
planning, employee benefits and compensation planning. This chapter then
focuses on assessing income needs and resources. Current income sources and
assets are discussed, followed by a section on retirement needs analysis. In this
section, the authors present a seven step planner. A brief discussion of financial
needs at retirement follows this, along with a short discussion of retirement
funding shortfalls. The chapter closes with an extensive Retirement Planning
Asset Worksheet.
CHAPTER OUTLINE:
A. Current Income Sources and Assets
B. Retirement Needs Analysis
1. Steps in calculating retirement funding
2. Seven step planner
3. Financial needs at retirement
4. Retirement funding shortfalls
C. Retirement Planning Asset Worksheet
D. Retirement Needs Worksheet
1
Chapter 2
FEATURED TOPICS:
Current Income Sources and Assets
Retirement Needs Analysis
FIGURES:
Figure 2.1 Retirement Planning Asset Worksheet
Figure 2.2 Retirement Needs Worksheet
CFP® CERTIFICATION EXAMINATION TOPIC:
Topic 59: Retirement needs analysis
COMPETENCY:
Upon completion of this chapter, the student should be able to:
1. Have a basic understanding of retirement income needs
2. Identify key aspects of retirement needs analysis
KEY WORDS:
qualified plan, nonqualified plan, defined contribution plan, defined benefit plan,
age weighted plan
DISCUSSION:
1. Discuss the significance and impact of employee benefit plans for
retirement planning.
2. Discuss the process of retirement needs analysis including the various
assumptions and steps in the process.
Chapter 2
QUESTIONS:
1. Which of the following are considered fundamental steps in the retirement
planning process?
(1) assessing client retirement financial needs
(2) determining how much of the need will be met
(3) establish a plan for any cash flow shortfall
(4) sell investments based on projected income needs
a.
b.
c.
d.
(1) only
(1) and (2) only
(1) (2) and (3) only
(2) (3) and (4) only
Chapter 2, p. 17
2. Which one of the following nonretirement-related needs may have a
significant impact on retirement assets?
a.
b.
c.
d.
long term care for a parent
client’s primary housing
Social Security income benefits
private Medicare supplement insurance
Chapter 2, pp. 18, 20, 21
3. Capital needs at death can have a significant impact in any planning scenario.
Which one of the following is a reason to include this area when doing
retirement planning?
a. clients cannot purchase insurance at more advanced ages
b. funding these needs is more economical when a client begins at a
younger age
c. these concerns are unlikely ever to become a capital needs at death issue
d. the purchase of insurance eliminates the need for any further capital
needs at death planning
Chapter 2, p. 21
4. Looking beyond pure capital accumulation needs, which one of the following
is a primary capital needs planning objective?
a. determining pension plan income benefits
Chapter 2
b. identifying retirement cash flow
c. accounting for income from future savings
d. translating capital into living expense needs
Chapter 2, p. 20
ANSWERS:
1. c
2. a
3. b
4. d