quiz: you are close to retirement..

CFA Level III
#1

Once an individual reaches the retirement stage of life, the main concern is: A) safety of principal, with investment income being secondary. B) reallocating financial assets to adopt a more conservative profile. C) establishing a drawdown rate that will not result in their outliving their assets.

#2

C

#3

C

#4

C…

#5

B

#6

Hint :slight_smile: for people chose C, please point out where it is on notes/book? Could not find it…

#7

This is in the chapter discussing human and financial capital - basically, there is no more financial capital to be earned, so therefore, establishing a drawdown rate is appropriate

#8

B - they do not need to establish a draw down rate that will not result in their outliving their assets, simply buying lifetime annuity insurance will accomplish this. Buy what is clear is that people close to retirement will have a lower appetite for risk all things being equal. A is “obviously” wrong as it assume liquidity is unimportant. Also, a more conservative profile incorporates A and C

#9

Would go for B though C looks close as well.

#10

stevenevans Wrote: ------------------------------------------------------- > This is in the chapter discussing human and > financial capital - basically, there is no more > financial capital to be earned, so therefore, > establishing a drawdown rate is appropriate Yes, the answer is C, and I have read the chapter. But why B is wrong? Even if no more human capital, they can still own financial capital from their existing portfolio.

#11

hellscream Wrote: ------------------------------------------------------- > stevenevans Wrote: > -------------------------------------------------- > ----- > > This is in the chapter discussing human and > > financial capital - basically, there is no more > > financial capital to be earned, so therefore, > > establishing a drawdown rate is appropriate > > > Yes, the answer is C, and I have read the > chapter. > > But why B is wrong? Even if no more human capital, > they can still own financial capital from their > existing portfolio. All of them are right. But C is the main concern, your money should not get over before you die.

#12

C - Longevity Risk, probably the risk individual clients in retirement fear the most.