Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

The capital conservation model is particularly suited for individuals like Sam Peterson who wish to maintain their retirement income while preserving their principal investment. This approach focuses on generating income through investment returns without depleting the original capital. Investors using this model aim to withdraw only the earnings generated by their investments instead of the principal itself, ensuring that their nest egg remains intact over the long term.

This model typically involves a conservative investment strategy that emphasizes stability and income generation, thus preventing the erosion of the capital base. Sam's intent to avoid touching his principal aligns perfectly with the objectives of the capital conservation model, demonstrating a commitment to long-term financial security.

Other financial models, such as the capital utilization model, focus on actively using the principal to generate income, which would not meet Sam’s requirement of preserving his principal. The cash flow model, while beneficial for managing income and expenses, does not inherently emphasize capital preservation. Lastly, the fixed investment model often involves predetermined investment strategies that may not prioritize maintaining the initial capital amount.