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13 Cards in this Set
- Front
- Back
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Define the concept "financial security at retirement"
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Having sufficient resources to live at your desired comforct level without the need for employment income.
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What are the 8 basic factors affecting retirement planning?
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1. Remaining worklife expectancy.
2. Retirement life expectancy. 3. Basic savings concepts 4. Annual income needed 5. Wage replacement ratio 6. Sources of retirement income 7. Inflation 8. Investment returns |
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RWLE
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Remaining Work Life Expectancy (work period remaining before retirement at a given time)
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WLE
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Work Life Expectancy
the number of years a person will spend in the workforce |
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Why is average WLE decreasing?
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Later entry in the workforce b/c of time for acquiring education; early retirement
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RLE
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Retirement life expectancy - the number of years between starting retirement and death
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What financial needs/expenses tend to decrease with retirement?
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Social security taxes; the need for savings; work-related expenses (clothes, transportation, meals, etc.); mortgage (possibly)
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What financial needs/expenses tend to increase at or during retirement?
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Health care, travel, gifts, property tax
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Define the wage replacement ratio.
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An estimate of the percentage of income needed at retirement compare to pre-retirement income
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What are the 2 methods for calculating the wage replacement ratio.
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1. Top-down (pure percentage) approach.
2. Budgeting approach |
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What are the three primary sources of retirement income?
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1. Social Security
2. Pension/company-sponsored plan 3. Personal savings |
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Define "Capital Needs Analysis"
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the process of calculating the amount of investment capital needed at retirement to maintain the pre-retirement lifestyle
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What are the 3 methods for Retirement Capital Needs Analysis?
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1. Basic planning - annuity method
2. Advanced planning - capital preservation model 3. Advanced planning - purchasing power preservation model |
