Once the cash flows to be financed are determined, whether via a detailed version of the determination of planned expenditures or the simpler “rule of thumb approach,” the question of how each $1 of assets will be turned into an income flow must be addressed. How much income will each dollar generate, and for how long? This is the basic issue of longevity risk (the risk that a person will live either beyond, or not until, their “life expectancy”). This source of uncertainty presents perhaps the most significant challenge for cash flow planning in retirement. (more…)

Still other decisions must be made about pension plans. The retirement age must be decided, and consideration must be given to provisions for advantages of early retirement and the resulting adjustment of benefits. Employees by law may work beyond age 65 until they have 10 years of participation in the plan.

When a retirement plan provides that a participant may take his benefits in the form of an annuity, (more…)

The financial crisis in the world has been on edge especially those who are related to private pension funds whether voluntary or with a solidarity contribution on the part of the state. Of course, in Colombia things are not as severe as in the United States, but with such a tremendous financial position the risk is latent, it does not entail a red alert, even more if one takes into account the disturbing news January 2008 when the Superintendency of Banks reported that the pension and severance (more…)

When you retire, are you going to have enough money to meet all your expenses and keep up with inflation? If you are like the vast majority of us, your answer will be a resounding, “NO”!

Statistically, 95% of people retire with too few financial resources. (more…)

Retirement and retirement income systems are relatively new and evolving institutions. Paradoxically, industrialization created both the need and the opportunity for the nation’s “old-age retirement income support system.” Improvements in nutrition, sanitation, and public health led to more people reaching old age and living longer once they were there. (more…)