Assignment 2 - Retirement Risks

Question 1

Concept of transitioning into retirement over a # of yrs, working PT and recv’g some retirement benefit

Answer 1

phased retirement

Question 2

risk of outiving retirement resources

Answer 2

Longevity Risk

Question 3

According to Society of Actuaries:

1. fin. and econ. risk
2. business and employment risks
3. public policy risks
4. risks related to longevity, outliving assets, and chg’s in family structures

Answer 3

(4) components of retirement risks

Question 4

1. poor planning
2. low earnings so unable to save
3. failing to save
4. asset erosion due to investments

Answer 4

(4) reasons for shortfalls of retirement accounts

Question 5

eased fiduciary concerns of plan sponsors

by:
1. creating auto-enrollment safe-harbor
2. creating default inv. (QDIA)
3. allowing inv. comp. to provide fin. advice

Answer 5

How PPA supported growth of DC plans

Question 6

living arrangement for seniors that provides a range of services that will cover the needs as they age and need for care increases
-such as medical needs and general life needs

Answer 6

life care community

Question 7

• phase of life following an extended period where indiv. engage in income-earning work
• they set aside assets or become entitled to benef.
• following the work period, they then cease to work and use the assets/earned benef. to sustain resource needs

Answer 7

Retirement concept

Question 8

risk of retirees finding themselves w/ having inadequate resources for their living needs at or during retirement

Answer 8

retirement risk

Question 9

1. resource shortfalls
2. cataclysmic events
3. environmental changes
4. loss of ability to indep. manage risks and living needs

Answer 9

factors that contribute to retirement insecurity

Question 10

1. changes in tax structure
2. alterations in social insurance systems
3. modifications of employer or self-maintained benefits programs
4. adaptations in the econ. or investment risk

Answer 10

Environmental changes that contrib to retirement insecurity

Question 11

1. should have adequate information avail.
2. should have the mental competency to self-sufficiently mange risks
   * with these reasons, it is prudent for an indiv. to hire a trustee or establish a process to manage these decisions if the need was to arise in the future

Answer 11

(2) attrib. important to managing retirement risks

Question 12

Over short-time periods, there can be substantial variation and diversion from historical rate of return means for defined contrib. holdings.

Answer 12

Large variations of outcomes in income replacement ratios for defined contrib. partic. in relation to final salary.

Question 13

Portfolios of assets that fail to outpace INFLATION cannot succeed in providing adequate purchasing power to retirees.

Answer 13

Inflation Risk

Question 14

1. ) any chg to tax codes at the fed’l, state, or local level
   - DC plans provide retirees pref. tax trtmnt; SS benef. are free of income taxation if income is below certain level; certain RS vehicles make distrib. entirely tax fee if conditions are met
2. ) alterations to terms of eligib. requirements or actual benefits paid

Answer 14

Financial effects of gov’t actions

Question 15

• adequacy of contrib.
• right array of inv. options
• fin. educ. for plan partic.
• plan features that assist in protecting against poor decision amking by partic.
• important policies and practicies related to distrib. of plan assets.

Answer 15

factors that lead to successful DC plan