What is an Actuarial Assumption?
” In order for an insurance company to truly calculate the expenses that are associated with providing clients with such benefits as retirement plans or pensions, it is necessary to make an accurate actuarial assumption. Essentially, an actuarial assumption will take into consideration all aspects of the plan, and be able to provide a monetary figure of what it costs the individual or employer to operate the retirement plan, both short term and long term. Here are some examples of factors that must be included in any actuarial assumption in order for the assumption to be accurate. . Age, general health, and life expectancy of the individual are an important factor in making an accurate actuarial assumption.
In order for an insurance company to truly calculate the expenses that are associated with providing clients with such benefits as retirement plans or pensions, it is necessary to make an accurate actuarial assumption. Essentially, an actuarial assumption will take into consideration all aspects of the plan, and be able to provide a monetary figure of what it costs the individual or employer to operate the retirement plan, both short term and long term. Here are some examples of factors that must be included in any actuarial assumption in order for the assumption to be accurate. Age, general health, and life expectancy of the individual are an important factor in making an accurate actuarial assumption. The actuary will look at the current age and health condition of the individual into consideration and calculate the potential number of years until retirement age is reached. This process lays the foundation for the actuarial assumption, and provides the framework in which other aspect
An actuarial assumption is a factor used in projecting future events that may affect pension costs. These factors include interest rates, investment earnings, mortality rates, etc. What is the investment return assumption? The investment return assumption is the estimated future net rate of return on current and future assets. *This page was originally posted in 2004. However, the general information on rates applies for all years.
