Professional Documents
Culture Documents
Funds
Pensions
Definition: A pension plan is an asset pool that
accumulates over an individuals working years
and is paid out during the nonworking years.
Developed as Americans began relying less on
children for care during their later years.
Also became popular as life
expectancy increased.
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Types of Pensions
The pension fund industry comprises two distinct sectors.
1. Private pension funds: are those funds administered by
a private corporation ( e.g. (insurance company, mutual
fund).
Any pension plan set up by employers, groups, or individuals
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$2000 x 20 = $40,000
$2000 x 25 = $ 50,000
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Retirement Benefit
1. Retire Now
$ 48000
2. Retire in 5 years
$ 50000
3. Retire in 10 years
$ 52,000
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Retirement Benefit
Retire now
$75,000
$ 80,000
Retire in 10 years
$ 85,000
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1. Employer contribution
2. Any additional employee contribution
3. Gain or losses on the investments purchased by the fund with these
contributions.
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Social Security
Pay as you go system, where current
funding is used (partially) to pay
current benefits.
Projected number of workers is falling while
projected number of retirees is increasing,
which will cause problems in years to come
if not corrected.
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Social Security
Its difficult to measure the health of the
social security system. Many factors are
hard to predict, such as birth rates and the
rate of immigration. Although it may not
fail, itd be wise for you plan other sources
for your retirement cash flows.
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Chapter Summary
Insurance Companies: the nature of the
industry, including rationale and people
employed in the industry, was presented.
Fundamentals of Insurance: the seven
fundamental ideas behind all insurance
were listed and reviewed.
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