CRPC cheat sheet

Discovery sequence: establish engagement, gather quantitative data (income, assets, liabilities, cash flow), gather qualitative data (goals, health, family, risk tolerance), then analyze and recommend.

Quantitative discovery captures verifiable numbers such as tax returns, account statements, pension estimates, and Social Security statements; qualitative discovery captures goals, preferences, health, and family obligations.

Risk tolerance has two components: ability to bear risk (financial capacity and time horizon) and willingness to bear risk (psychological comfort); the planning allocation is constrained by the lower of the two.

Time horizons are commonly segmented as short term (under 3 years), intermediate term (3 to 10 years), and long term (over 10 years); retirement accumulation often requires multiple horizon buckets.

A fiduciary standard requires acting in the client's best interest, disclosing conflicts, and providing prudent advice; a suitability standard requires a reasonable basis that a recommendation fits the client.

The engagement scope should document services provided, compensation method, client responsibilities, and conflict disclosures before recommendations are made.

Client discovery should include longevity factors such as health status, family history, caregiving obligations, and housing plans because they directly affect retirement cash flow needs.

Data verification includes reconciling account statements, beneficiary designations, tax returns, insurance policies, and Social Security records to avoid planning based on incomplete information.

Replacement ratio equals retirement spending divided by pre-retirement gross income; common planning ranges are 70% to 80%, but the ratio should be individualized.

Capital needs method estimates required retirement assets as the present value of the annual retirement cash flow shortfall, discounted at an assumed return.

Annual funded gap equals projected annual retirement expenses minus guaranteed income sources such as Social Security, pensions, and annuity payments.

Future cost formula: future cost = current cost × (1 + inflation rate)^number of years.

Exact real return = [(1 + nominal return) ÷ (1 + inflation rate)] − 1; the approximation nominal return minus inflation overstates real return when inflation is high.

Savings payment formula for an end-of-period annuity: PMT = FV × r ÷ [((1 + r)^n) − 1], where FV is the funding target and r is the periodic return.

Monte Carlo analysis estimates the probability of funding retirement goals using randomized return sequences; it produces a probability, not a guarantee.

Sensitivity testing should vary inflation, investment return, retirement age, and longevity because small changes in these assumptions can materially change required capital.

Goal setting should distinguish essential from discretionary spending and use specific, measurable, achievable, relevant, and time-bound criteria.

A defined benefit plan promises a benefit often calculated as a percentage of final average pay multiplied by years of service; the employer bears investment risk.

A defined contribution plan provides an account balance based on contributions and investment performance; the participant bears investment risk.

For 2025, the 401(k) elective deferral limit is $23,500; the age 50 catch-up is $7,500, and the special ages 60 to 63 catch-up is $11,250.

Vesting in defined benefit plans is commonly cliff vesting at 5 years or graded vesting over 3 to 7 years; employee deferrals in defined contribution plans are always 100% vested.

ADP and ACP nondiscrimination tests limit deferrals and matching contributions for highly compensated employees; safe harbor plan designs are exempt from those tests.

Top-heavy defined contribution plans generally require an employer contribution of at least 3% of compensation for non-key employees.

Section 402(g) limits elective deferrals, while section 415(c) limits total annual additions to a defined contribution plan, including employer contributions and forfeitures.

A cash balance plan is a defined benefit plan expressed as a hypothetical account with pay credits and interest credits.

A profit sharing plan allows discretionary employer contributions and may be integrated with Social Security within nondiscrimination rules.

Traditional IRA deductibility depends on active participation in an employer plan and modified adjusted gross income; Roth IRA contributions have income limits.

For 2025, the IRA contribution limit is $7,000, with a $1,000 catch-up for age 50 and older; contributions require earned income.

Qualified Roth IRA distributions are tax-free when the five-taxable-year period is satisfied and a triggering event occurs, such as age 59½, death, disability, or first-time home purchase.

The required beginning date for traditional IRA required minimum distributions is April 1 following the year the owner reaches RMD age; Roth IRAs have no lifetime RMDs.

Fixed annuities guarantee a minimum credited rate; variable annuities invest in subaccounts; indexed annuities credit interest based on an index subject to caps and participation rates.

Annuity accumulation phase builds contract value, while annuitization converts capital into a guaranteed income stream; surrender charges and mortality and expense risk charges reduce net value.

A SEP IRA is employer-funded, with contributions limited to the lesser of 25% of compensation or an indexed dollar limit.

A SIMPLE IRA allows employee salary deferrals plus an employer match or nonelective contribution; contributions vest immediately and a two-year restriction applies to rollovers.

A solo 401(k) is available to an owner-only business and permits employee deferrals plus employer profit sharing contributions.

Asset allocation across asset classes is a primary determinant of portfolio return variability and should reflect time horizon, risk capacity, and risk tolerance.

Rebalancing restores target weights using calendar rules or threshold bands, such as a 5-percentage-point drift trigger.

A glide path generally reduces equity exposure as the retirement date approaches; target-date funds implement a glide path and may continue de-risking after the target date.

Human capital is bond-like for workers with stable earnings and stock-like for workers with variable earnings; it affects the appropriate financial portfolio allocation.

Correlation below 1 between assets can reduce portfolio volatility without proportionally reducing expected return.

Sequence-of-returns risk is greatest near and just after retirement because withdrawals during a market decline permanently reduce portfolio longevity.

Expected portfolio return is the weighted average of asset class expected returns; portfolio variance depends on weights, individual variances, and covariances.

Inflation hedges include TIPS, equities, and real assets; nominal long-term bonds are more vulnerable to unexpected inflation.

Investment fees and expense ratios reduce net returns directly and should be evaluated against the expected benefit of the investment strategy.

The 4% rule is a planning heuristic that withdraws 4% of the initial portfolio, adjusted for inflation annually; it is not a guarantee of portfolio sustainability.

A bucket strategy segments assets by time horizon: cash for near-term spending, bonds for intermediate needs, and equities for long-term growth.

Dynamic withdrawal strategies use guardrails to adjust spending when portfolio values deviate from plan, reducing depletion risk.

Required minimum distributions from traditional accounts use the Uniform Lifetime Table unless the sole beneficiary is a spouse more than 10 years younger.

Qualified charitable distributions are direct IRA-to-charity transfers available at age 70½ and later; the amount is excluded from gross income and can satisfy an RMD.

Roth conversions can fill lower tax brackets, but the conversion increases taxable income in the conversion year and may affect Medicare IRMAA.

Sequence risk means withdrawals during a market downturn deplete capital faster than the same withdrawals during stable or rising markets.

Tax-efficient withdrawal ordering often considers taxable accounts, tax-deferred accounts, and tax-free accounts, but bracket management and IRMAA can change the optimal order.

Annuitization provides longevity protection and guaranteed income but reduces liquidity and control over the assets.

Social Security full retirement age is 67 for workers born in 1960 or later; the benefit is based on the 35 highest years of indexed earnings.

Early Social Security claiming reduces benefits by 5/9 of 1% per month for the first 36 months and 5/12 of 1% per month for additional months.

Delayed retirement credits increase Social Security benefits by 8% per year after full retirement age for those born in 1943 or later, up to age 70.

A spousal benefit can be up to 50% of the worker's primary insurance amount at the spouse's full retirement age; delayed retirement credits do not apply to spousal benefits.

A survivor benefit can be up to 100% of the deceased worker's benefit, with reduction if the survivor claims before full retirement age.

Medicare Part A covers hospital services, Part B covers medical services, Part D covers prescription drugs, and Part C is Medicare Advantage.

Medicare Part B premiums are subject to income-related monthly adjustment amounts based on modified adjusted gross income from two years prior.

The Medicare initial enrollment period is 7 months around age 65; late enrollment can trigger penalties for Part B and Part D.

Social Security cost-of-living adjustments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Long-term care risk includes home care, assisted living, and nursing home costs; the setting and duration determine the financial exposure.

Long-term care insurance policy features include elimination period, benefit period, daily or monthly benefit, inflation protection, and shared care riders.

A hybrid life and long-term care policy combines a death benefit with long-term care coverage and may be funded through a 1035 exchange.

Life insurance in retirement may address income replacement, estate liquidity, final expenses, or business succession obligations.

Health savings accounts offer deductible contributions, tax-free growth, and tax-free qualified medical withdrawals when paired with a high-deductible health plan.

After age 65, non-medical HSA withdrawals are taxed as ordinary income but are not subject to the 20% additional tax.

Medigap policies supplement Original Medicare and help pay deductibles, coinsurance, and copayments; Medigap is not the same as Medicare Advantage.

Umbrella liability insurance provides excess liability coverage above auto and homeowners limits and protects retirement assets from lawsuits.

Marginal tax rate applies to the next dollar of income, while effective tax rate equals total tax divided by total income; retirement planning manages the marginal rate across years.

Traditional IRA and 401(k) withdrawals are generally taxed as ordinary income; qualified Roth distributions are tax-free.

Long-term capital gains are taxed at 0%, 15%, or 20% depending on income, and the 3.8% net investment income tax can apply above threshold amounts.

The federal estate tax exemption is indexed for inflation, and portability allows a surviving spouse to use a deceased spouse's unused exemption.

Beneficiary designations generally override will provisions, so they must be reviewed after marriage, divorce, birth, or death in the family.

A revocable living trust can avoid probate but does not remove assets from the taxable estate; an irrevocable trust can remove assets from the estate.

Inherited assets generally receive a step-up in basis to fair market value at death, but traditional IRA balances do not receive a step-up.

Required minimum distributions and qualified charitable distributions affect taxable income and may affect Medicare IRMAA.

The annual gift tax exclusion is indexed, and gifts above the exclusion use part of the lifetime estate and gift tax exemption.

Discovery sequence: establish engagement, gather quantitative data, gather qualitative data, analyze, and recommend.

Quantitative data includes income, assets, liabilities, and cash flow; qualitative data includes goals, health, family, and risk tolerance.

Risk tolerance combines ability to bear risk and willingness to bear risk; the allocation is constrained by the lower of the two.

Time horizons are short term under 3 years, intermediate term 3 to 10 years, and long term over 10 years.

A fiduciary must act in the client's best interest and disclose conflicts; suitability requires a reasonable basis that a recommendation fits.

Engagement scope should document services, fees, client responsibilities, and conflicts.

Discovery should include health, family history, caregiving, and housing plans.

Data verification includes statements, tax returns, beneficiary designations, and Social Security records.

Replacement ratio equals retirement spending divided by pre-retirement gross income; common planning ranges are 70% to 80%.

Capital needs method discounts the present value of the retirement cash flow shortfall.

Annual funded gap equals retirement expenses minus guaranteed income such as Social Security and pensions.

Future cost = current cost × (1 + inflation)^years.

Real return = [(1 + nominal return) ÷ (1 + inflation)] − 1.

Savings PMT = FV × r ÷ [((1 + r)^n) − 1] for an end-of-period annuity.

Monte Carlo analysis estimates the probability of funding goals across randomized return sequences.

Sensitivity testing varies inflation, return, retirement age, and longevity.

Goals should separate essential from discretionary spending and use measurable criteria.

A defined benefit plan promises a formula benefit and the employer bears investment risk.

A defined contribution plan provides an account balance and the participant bears investment risk.

For 2025, the 401(k) elective deferral limit is $23,500; age 50 catch-up is $7,500; ages 60 to 63 catch-up is $11,250.

Defined benefit vesting is commonly 5-year cliff or 3- to 7-year graded; employee deferrals are always fully vested.

ADP and ACP tests limit highly compensated employee contributions; safe harbor designs are exempt.

Top-heavy defined contribution plans generally require a 3% employer contribution for non-key employees.

Section 402(g) limits elective deferrals; section 415(c) limits total annual additions.

A cash balance plan is a defined benefit plan with hypothetical account credits.

A profit sharing plan allows discretionary employer contributions and may be integrated with Social Security.

Traditional IRA deductibility depends on active plan participation and MAGI; Roth IRA contributions have income limits.

For 2025, the IRA limit is $7,000 with a $1,000 age 50 catch-up; earned income is required.

Qualified Roth IRA distributions require the 5-year rule plus age 59½, death, disability, or first-time home purchase.

Traditional IRA RMDs begin by April 1 after the RMD-age year; Roth IRAs have no lifetime RMDs.

Fixed annuities guarantee a minimum rate; variable annuities use subaccounts; indexed annuities use caps and participation rates.

Annuitization converts capital into guaranteed income; surrender charges and M&E charges reduce net value.

SEP IRA contributions are employer-funded and limited to the lesser of 25% of compensation or an indexed dollar limit.

SIMPLE IRAs allow employee deferrals plus employer match or nonelective contributions; vesting is immediate and a 2-year rollover restriction applies.

A solo 401(k) allows owner deferrals plus employer profit sharing.

Asset allocation reflects time horizon, risk capacity, and risk tolerance and is a primary driver of return variability.

Rebalancing uses calendar rules or threshold bands such as 5-percentage-point drift.

A glide path reduces equity exposure as retirement approaches; target-date funds implement it.

Human capital is bond-like for stable earners and stock-like for variable earners.

Correlation below 1 can reduce portfolio volatility without proportionally reducing expected return.

Sequence-of-returns risk is greatest near retirement because early withdrawals during a decline permanently reduce capital.

Expected portfolio return is the weighted average of asset class returns; variance depends on weights and covariances.

TIPS, equities, and real assets are inflation hedges; nominal long-term bonds are vulnerable to unexpected inflation.

Fees and expense ratios reduce net returns directly.

The 4% rule withdraws 4% of the initial portfolio, adjusted for inflation annually; it is not guaranteed.

A bucket strategy uses cash for near-term spending, bonds for intermediate needs, and equities for long-term growth.

Guardrail strategies adjust spending when portfolio values deviate from plan.

RMDs use the Uniform Lifetime Table unless the sole beneficiary is a spouse more than 10 years younger.

Qualified charitable distributions are direct IRA-to-charity transfers at age 70½ and later; they are excluded from income and can satisfy an RMD.

Roth conversions fill lower tax brackets but increase current taxable income and may affect IRMAA.

Sequence risk means withdrawals during a downturn deplete capital faster.

Tax-efficient withdrawal ordering considers taxable, tax-deferred, and tax-free accounts plus bracket management and IRMAA.

Annuitization provides longevity protection but reduces liquidity.

Social Security full retirement age is 67 for workers born in 1960 or later; benefits use the 35 highest indexed earnings years.

Early claiming reduces benefits by 5/9 of 1% per month for the first 36 months and 5/12 of 1% for additional months.

Delayed retirement credits add 8% per year after full retirement age up to age 70 for those born in 1943 or later.

Spousal benefits can be up to 50% of the worker's PIA at the spouse's full retirement age; delayed credits do not apply.

Survivor benefits can be up to 100% of the deceased worker's benefit, reduced if claimed before full retirement age.

Medicare Part A is hospital insurance, Part B is medical insurance, Part D is drug coverage, and Part C is Medicare Advantage.

IRMAA adds income-related amounts to Part B and Part D premiums based on MAGI from two years prior.

The Medicare initial enrollment period is 7 months around age 65; late enrollment can trigger penalties.

Social Security COLAs are tied to the CPI-W.

Long-term care exposure includes home care, assisted living, and nursing home costs; setting and duration drive the financial risk.

LTC insurance features include elimination period, benefit period, daily or monthly benefit, inflation protection, and shared care riders.

Hybrid life and LTC policies combine death benefit and care coverage and may be funded by a 1035 exchange.

Life insurance in retirement can address income replacement, estate liquidity, final expenses, or business succession.

HSAs provide deductible contributions, tax-free growth, and tax-free qualified medical withdrawals with a high-deductible health plan.

After age 65, non-medical HSA withdrawals are taxed but not penalized.

Medigap supplements Original Medicare; it is not Medicare Advantage.

Umbrella liability insurance provides excess liability coverage above auto and homeowners limits.

Marginal tax rate applies to the next dollar of income; effective tax rate equals total tax divided by total income.

Traditional IRA and 401(k) withdrawals are ordinary income; qualified Roth distributions are tax-free.

Long-term capital gains rates are 0%, 15%, or 20%, and the 3.8% net investment income tax can apply above thresholds.

The federal estate tax exemption is indexed, and portability lets a surviving spouse use a deceased spouse's unused exemption.

Beneficiary designations generally override wills and must be reviewed after life events.

A revocable living trust can avoid probate but does not remove assets from the taxable estate; an irrevocable trust can remove assets.

Inherited assets generally receive a step-up in basis at death; traditional IRA balances do not.

RMDs and QCDs affect taxable income and may affect Medicare IRMAA.

The annual gift tax exclusion is indexed, and gifts above it use part of the lifetime exemption.