Skip to content

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

Caselet: Mrs. Nair, aged 45, plans to retire at 60 and expects to live to 85. She is currently saving only in a savings bank account and holds no equity. Her adviser notes that her biggest retirement risk is that her money may not last as long as she does. Which risk is the adviser describing?

The adviser is describing longevity risk, which is the danger that a retiree lives longer than the corpus can support. It is heightened by long retirement periods and low-return savings, so planning must assume a sufficiently long life expectancy and growth in assets.

  1. ALongevity riskCorrect
  2. BLiquidity risk
  3. CReinvestment risk
  4. DCounterparty risk

Explanation

Longevity risk is the risk of outliving one's savings, which arises when retirement is long and returns barely beat inflation. Liquidity, reinvestment and counterparty risks concern access to cash, reinvestment rates and default respectively, not outliving the corpus.

Did you get it right without looking?

One question tells you little. A timed set on Retirement Planning Basics shows your real accuracy, how long you take and where you lose marks.

Practise Retirement Planning BasicsFree diagnostic mock

More Retirement Planning Basics questions