NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Planning Basics
In retirement planning, the term 'longevity risk' refers to the risk that:
Longevity risk is the risk that a retiree lives longer than planned and runs out of the retirement corpus. It differs from market risk, inflation risk and medical cost risk, which describe other threats to retirement income.
- AThe retiree's investments fall sharply in value just before retirement
- BThe retiree outlives his or her accumulated retirement corpusCorrect
- CInflation rises faster than the retiree's pension indexation
- DThe retiree's health expenses exceed the insurance cover
Explanation
Longevity risk is the possibility that a person lives longer than expected and exhausts the savings meant to fund retirement. The market-fall option describes sequence or market risk, the inflation option describes inflation risk, and the health option describes medical cost risk.
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