Chartered Retirement Planning Counselor (CRPC) Practice Exam

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Prepare for the Chartered Retirement Planning Counselor Exam. Engage with flashcards and multiple choice questions, each with hints and explanations. Get ready for your certification!

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To maintain purchasing power, Barb's funding requirement increased due to what factor?

  1. Change in interest rates

  2. Inflation

  3. Market volatility

  4. Lower returns

The correct answer is: Inflation

The correct answer, which identifies inflation as the factor that necessitates an increase in Barb's funding requirement to maintain purchasing power, highlights a fundamental concept in financial planning. Inflation represents the rate at which the general level of prices for goods and services rises, resulting in a decrease in purchasing power over time. This means that as prices increase, the same amount of money will buy fewer goods and services in the future. In the context of retirement planning, it is crucial to account for inflation when determining how much money will be needed in the future to secure the same standard of living. If Barb's funding requirement did not increase with inflation, her resources may not suffice to cover her living expenses later in retirement, effectively reducing her purchasing power. Understanding that inflation erodes the real value of money helps individuals and financial planners develop a compelling strategy that ensures adequate funding over the long term, particularly in periods of consistent price increases. This approach often includes adjusting investment strategies to seek returns that outpace inflation, thereby preserving purchasing power in retirement.