Longevity risk
The risk arising from underestimating the years in retirement, which will mean there may not be enough money to last the retirement years.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Accumulation stageThe working years, in which saving and investment build the retirement corpus — the stage where the ability to take risk is highest and where time, not contribution size, does most of the work.
- Debt to income ratioMonthly debt servicing commitment divided by monthly income — the ratio that says whether a household's income can carry the loans it already has, let alone another one.
- Distribution stageThe retired years, in which the corpus built during working life is converted into periodic income — the stage where protecting capital matters more than growing it, because it can no longer be topped up.
- Five-year service testThe rule that makes an EPF withdrawal tax-free: complete five consecutive years of service and the balance is exempt; withdraw before that and it is taxable, with two exceptions.
- InflationA sustained general rise in the price level, which erodes what a rupee buys — and the reason a nominal return has to be deflated before it means anything.
- Permanent Retirement Account NumberThe unique account number issued when an NPS account is opened; it stays with the subscriber for life and across employers, which is what makes NPS portable in a way EPF historically was not.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Pre-retirement stageThe middle of the three phases of retirement planning — the years just before and around retiring, when physical and psychological changes arrive and the rules and procedures must be learned.
- Distribution stageThe retired years, in which the corpus built during working life is converted into periodic income — the stage where protecting capital matters more than growing it, because it can no longer be topped up.
- Inflation riskThe risk that the money an investment pays out will be worth less in goods and services than expected, because prices have risen — highest in fixed-return products and most damaging to retirees.
- Reverse mortgageA loan that pays a senior citizen a periodic income against a pledge of the residential property they live in, repayable from the sale of that property after death or permanent departure.
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