Advanced Diploma of Financial Planning (ADFP) Practice Test

Which of the following typically does NOT decrease during retirement?

1. Savings

2. Childcare expenses

3. Employment costs

4. Tax liabilities

The correct answer is: Tax liabilities

During retirement, tax liabilities often do not decrease and can sometimes even increase depending on various factors. Specifically, retirees may still have income sources such as Social Security, pension payments, or retirement account withdrawals, which can be taxable. Additionally, the sale of assets or investment income can contribute to taxable events. The other options generally show a tendency to decrease during retirement. For instance, savings might decrease as individuals begin to tap into their retirement funds for living expenses. Childcare expenses are likely to decline as retirees may no longer have dependent children or may have less need for childcare services. Employment costs also tend to drop since many retirees choose to leave the workforce, eliminating associated costs such as commuting or work-related expenses. Understanding these dynamics can help retirees plan their financial strategies effectively while navigating potential tax implications.