Question

In: Finance

1. There are many risks on the way to achieving financial independence. One such factor that...

1. There are many risks on the way to achieving financial independence. One such factor that affects retirement planning is a shortened work life expectancy due to untimely death, disability, health and/or unemployment. Which of the following is NOT a recommended way to mitigate this risk?

a. Obtaining insurance

b. Education

c. Training

d. Adequate capital accumulation

2. True or False: Two of the more important factors affecting retirement planning are the savings amount and the growth of GDP.

a. True

b. False

Solutions

Expert Solution

1. Retirement planning involves various kinds of risks and a short work life can affect the income stream of individual which will make it difficult for him to meet his or her retirement goals in the long run. There are various ways available in the market to mitigate this risk, some of them includes obtaining insurance, proper education and training. However, it does NOT include the way of 'Adequate capital accumulation'. This is because capital accumulation in itself does not generate return for the individual which can be used at the time of retirement.

2. The statement is 'True'. Amount of saving done by individual and the GDP growth of economy is essential for planning retirement in an effective way. Amount of saving done can determine the ultimate amount that can be received on retirement and the GDP growth rate can determine the rate of return that will be available on the savings that are invested today. If there will be higher GDP growth rate, then higher rate of return can be expected on money invested vice versa.


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