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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning

A 40-year-old client wants to retire at 60 and expects to live till 90. An adviser builds the retirement plan assuming the client may live well beyond the average life expectancy of the population. Which risk is the adviser primarily addressing?

The adviser is addressing longevity risk, which is the danger that a retiree lives longer than expected and exhausts the corpus. Planning for a life span beyond the population average builds in a buffer, whereas reinvestment, liquidity and currency risks concern different exposures.

  1. ALongevity riskCorrect
  2. BReinvestment risk
  3. CLiquidity risk
  4. DCurrency risk

Explanation

Longevity risk is the risk that the client outlives the retirement corpus. Planning for a long life expectancy, often beyond the population average, addresses it. Reinvestment, liquidity and currency risks relate to other concerns.

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