NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning
A 58-year-old client plans to retire at 60 and expects to live to 90. Her adviser recommends assuming a longer retirement period than the client's own estimate. Which risk is the adviser primarily addressing?
The adviser is addressing longevity risk, which is the chance that the client lives longer than expected and exhausts her retirement corpus. Planning for a longer retirement period builds a margin of safety into the corpus and withdrawal plan.
- ALongevity riskCorrect
- BReinvestment risk
- CLiquidity risk
- DCurrency risk
Explanation
Longevity risk is the risk of outliving one's retirement corpus. Assuming a longer retirement horizon reduces the chance that money runs out. Reinvestment, liquidity and currency risks relate to other concerns.
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