CFP® Practice Question

CFP® Practice Question Michael, age 62, retired this year and has not yet claimed Social Security benefits. His only taxable income for 2026 is $30,000 of interest and dividends. He expects to begin receiving substantial pension income and Social Security benefits at age 67. Which of the following planning strategies is MOST likely to reduce…

A 61-year-old employee retires and has a $900,000 balance in her employer’s 401(k) plan. She does not need the assets immediately and is considering whether to leave the funds in the plan or roll them into a traditional IRA. Which of the following factors would MOST strongly favor leaving the assets in the employer plan?…

A client inherited employer stock several years ago. The shares now represent 55% of her $2 million investment portfolio. She is reluctant to sell because she believes the company has excellent long-term prospects. What behavioral bias is the client MOST likely exhibiting?  Anchoring  Mental accounting  Familiarity bias Recency bias CLICK TO REVEAL ANSWERExpandC is the…

A CFP® professional recommends that a 52-year-old client accumulate retirement assets in taxable, tax-deferred, and tax-free accounts. What is the PRIMARY advantage of this strategy?  It guarantees a lower tax bracket in retirement.  It provides flexibility to manage taxable income during retirement.  It eliminates required minimum distributions.  It avoids taxation of Social Security benefits. CLICK…

A married couple owns the following assets: Residence titled as joint tenants with right of survivorship Individual brokerage account owned solely by the husband Husband’s IRA naming his wife as primary beneficiary Revocable living trust funded only with investment real estate The husband dies unexpectedly. Which of the following assets would generally NOT pass through…

A client expects to recognize an additional $20,000 of ordinary income in 2026. She asks her CFP® professional how much additional federal income tax she will owe. Which tax rate is MOST relevant in estimating the tax on the additional income?  Effective tax rate  Average tax rate  Marginal tax rate Capital gains tax rate CLICK…

David, age 74, has a traditional IRA with a December 31, 2025 balance of $1,000,000. His applicable IRS Uniform Lifetime Table distribution period for 2026 is 25.5. Approximately what is David’s required minimum distribution (RMD) for 2026? $25,500 $39,216 $40,000 $49,020 CLICK TO REVEAL ANSWERExpandB is the answer. An RMD is calculated by dividing the…

Susan purchased stock many years ago for $80,000. At her death in 2026, the stock is worth $250,000. Her son inherits the shares and sells them three months later for $255,000. Ignoring any transaction costs, how much taxable capital gain must the son recognize?  $5,000  $80,000  $170,000  $175,000 CLICK TO REVEAL ANSWERExpandA is the answer.…

A client owns a mutual fund with a beta of 1.4. If the overall stock market increases by approximately 10%, which of the following would be the best estimate of the fund’s return based solely on its beta? 4% 10% 14% 24% CLICK TO REVEAL ANSWERExpandC is the answer. Beta measures a portfolio’s sensitivity to…

Which of the following statements regarding a Health Savings Account (HSA) is correct?  Contributions are made with after-tax dollars, but qualified distributions are tax-free.  Contributions are deductible (or excluded from income if made through payroll), earnings grow tax-deferred, and qualified distributions are tax-free.  Contributions are deductible, but earnings are taxable annually.  Qualified distributions are taxable…