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Fundamentals of Risk and Insurance, 11th Edition by Therese M. Vaughan, Emmett J. Vaughan

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CHAPTER OBJECTIVES

When you have finished this chapter, you should be able to

  • Identify the factors that create the risks related to retirement
  • Identify the two financial risks that arise in connection with the retirement risk
  • Identify the three broad steps in the retirement planning process
  • Identify the three lines of defense that constitute a well-designed retirement plan
  • Identify and describe the two approaches that may be used to estimate retirement needs
  • Explain the strategies that may be followed in managing the distribution of a retirement accumulation

In this chapter, we turn to the other side of the life contingency risk, the possibility of outliving one's income, which is the retirement risk. As we noted in Chapter 10, the retirement risk is the complement of the risk of premature death. If the individual dies prematurely, he or she will have no need for funds accumulating for retirement. If the individual lives until retirement, provision made for premature death will be unused, but there is a need for retirement funds. Because either outcome could occur, the individual must make provision for both contingencies.

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AN OVERVIEW OF THE RETIREMENT RISK

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