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, ~7,325 words.
Replacement ratio, usually targeted 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 rate. Closed-form rate:; uses post-retirement assumptions (not pre-retirement returns) and cancels. Salary-weighted factor:, or when. Sensitivity: is roughly linear in...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Example 5
- Example 6
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 5b
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