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Head of household status requires being unmarried (or considered unmarried) and paying more than half the cost of maintaining a home for a qualifying person. Only option B meets this. Others file single or married statuses without dependents. Filing status drives tax rates and deductions.

Risk management begins with identifying and quantifying exposures. Premature death is a fundamental pure risk for an income-dependent household. The curriculum highlights performing a life insurance needs analysis using approaches such as the human life value, needs-based (capital needs), or capital retention method. Given the client’s limited group coverage and family dependence, the most direct, cost-effective tool is adequate term life insurance matched to duration of need (e.g., years to retirement or until dependents become self-supporting). Option A explicitly calls for a needs analysis first, then securing appropriately sized level-term coverage—consistent with best practices and the risk control hierarchy (transfer via insurance). Option B improves liquidity but does not address the large capital shortfall at death. Option C focuses on cash value accumulation; permanent insurance may be appropriate for lifelong needs (estate liquidity, special needs dependents), but for income replacement alone term is typically the efficient first solution. Option D leaves the family exposed to the employer’s plan limits and portability issues; relying solely on group coverage is risky because it may change or end with employment. Hence A is the best action aligned with CFP risk planning standards.

A non-deductible traditional IRA accepts after-tax contributions, grows tax-deferred, but distributions are partly taxable (earnings) and partly return of basis. Roth IRAs (A) allow tax-free qualified withdrawals. Traditional 401(k)s (B) allow pre-tax deferrals. HSAs (D) offer triple tax advantages.

The Code prohibits borrowing from or lending money to clients, except in limited family or institutional lending contexts. This prevents conflicts of interest and protects the client relationship.

General principles of financial planning emphasize benchmarks for savings adequacy. A 25% savings-to-income benchmark of $120,000 equals $30,000 annually. The client is saving $20,000, which is $10,000 below the benchmark. Such gaps help planners identify shortfalls and recommend increasing contributions, adjusting lifestyle expenses, or extending retirement age. Option A incorrectly interprets the shortfall as an excess. Option B doubles the discrepancy. Option D incorrectly magnifies the difference. Accurate analysis ensures realistic planning aligned with client goals and financial capacity.