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13 Cards in this Set

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