Chapter 1

Question 1

Define the following term

Income replacement ratio [2]

Answer 1

The ratio of income✓✓
* In the year immediately following retirement✓✓
* To income in the year preceding retirement.✓✓
* It must be calculated consistently with pre-retirement income.✓✓

Bonuspoints:
Financial planners often recommend aiming for a replacement ratio between 70% and 85% of pre-retirement income, depending on individual circumstances.✓✓