Calculate replacement ratios for Defined Contribution (DC) and Defined Benefit (DB) plans, including final average salary (FAS), career average earnings (CAE), and career average revalued earnings (CARE) plans.
Free SOA Exam ALTAM (Advanced Long-Term Actuarial Mathematics) lesson in Pension Plans and Retirement Benefits. 37 min read, ~5,620 words.
Replacement ratio, where is first-year retirement income and is the salary just before retirement; it fixes only the FIRST year and erodes with inflation if the pension is not COLA-indexed. DC ratio: accumulate contributions at fund rate, divide by annuity factor, divide by final salary. Market-driven, not guaranteed. FAS DB...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 5a
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