Calculate the required contribution rate to meet a target replacement ratio for a DC plan participant, using a deterministic approach.
Free SOA Exam ALTAM (Advanced Long-Term Actuarial Mathematics) lesson in Pension Plans and Retirement Benefits. 49 min read, ~7,367 words.
Replacement ratio. Target is usually net of Social Security. Three blocks: project final salary, accumulate contributions to retirement, convert the fund to an annuity. Equate to target income and solve for the contribution rate. Closed-form rate:, where is the salary-weighted accumulation factor. Salary-weighted factor:, or in closed form. Sensitivity: is...
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- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Example 5
- Example 6
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Learning objectives
- 5b
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