Advanced Diploma of Financial Planning (ADFP) Practice Test

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Prepare for ADFP Test. Use flashcards and multiple choice questions, each with hints and explanations for better understanding. Start studying today!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is a common mistake people make when planning for retirement?

Saving too much too early
Starting to plan too late in life
Investing in high-risk assets only
Focusing too much on employer contributions

The correct answer is: Starting to plan too late in life

Starting to plan too late in life is indeed a common mistake many individuals make when preparing for retirement. When planning for retirement, time is a crucial factor because of the effects of compound interest and the overall accumulation of retirement savings. Individuals who delay their planning may miss out on significant benefits that come from early investing, such as the ability for their savings to grow over a longer period. Beginning retirement planning later in life often results in inadequate savings, leading to financial stress during retirement. People may underestimate how much they will need for retirement and fail to take proactive steps to build a sufficient retirement fund, thus putting themselves at risk of being unprepared when they stop working. This lack of preparation can lead to needing to work longer or adjusting their lifestyle during retirement in ways they may not have anticipated. By emphasizing the importance of starting retirement planning early, individuals can better position themselves for a more secure and comfortable retirement.