Chapter 12

Question 1

What are the three phases of ones lifetime from an income-earning perspective

Answer 1

1. Pre working (education)
2. Working career (generating income)
3. Retirement (no longer earning income)

Question 2

What is replacement ratio?

Answer 2

A method of evaluating a pension is to express the initial retirement income as a percentage of the pre-retirement income.

Question 3

What is the replacement ratio equation?

Answer 3

replacement ratio = income in the year after retirement/ income in the year before retirement