A finished FIN-355 Topic 1 plan risk bearer comparison example, assigning four risks between a pension and an account plan and pricing longevity as the balance gap it opens. Searches like "fin 355 topic 1 assignment example", "fin355 topic 1 sample" and "fin-355 topic 1 example" land here.
What a finished FIN-355 Topic 1 plan risk bearer comparison looks like
The finished comparison follows one illustrative career: twenty-five years of service ending on a final average salary of 80,000. The pension pays 1.5 percent of that salary for each year served, 30,000 a year for life, whatever markets do and however long the retiree lives. The account plan promises only contributions, so the example asks what balance would replace the pension. At an assumed 4 percent return, paying 30,000 a year for twenty-five years takes about 469,000; stretching the payments to thirty years takes about 519,000. That gap of about 50,000 is longevity risk in dollars, and under the account plan it belongs to the employee. A risk table then gives each exposure an owner, noting that a federal insurer backs private pensions up to limits set by law. Its final paragraph judges which plan suits this employee's tenure.
How a FIN-355 Topic 1 example is structured
The comparison is arranged by risk rather than by feature. Its first paragraph introduces the composite employee, the two plans on offer and the figures used, each marked illustrative. A short passage defines each plan in a sentence: one promises a benefit and funds it, the other funds contributions and promises nothing further. The core is a table with four rows, investment, longevity, inflation and employer failure, and a column per plan naming who absorbs the loss when that risk arrives. Beneath it, the replacement calculation converts the pension into the balance an account would need, first for twenty-five years of payments and then for thirty. The inflation row gets a paragraph of its own, because many private pensions pay a fixed amount that buys less each year. A portability passage covers an exit at 48. The verdict closes the paper and names the tenure at which it would reverse.
Four risks, each given an owner
Investment, longevity, inflation and employer failure each take a row, and the table says who pays under each plan when that risk turns out badly.
The pension restated as a balance
Thirty thousand a year becomes about 469,000 over twenty-five years at an assumed 4 percent, the sum an account holder would need to match the promise.
Longevity risk measured in dollars
Five more years of payments push the required balance to about 519,000, a difference the example reads as the price of living longer than planned.
Inflation left with the retiree
A pension fixed in dollars keeps its promise and still loses purchasing power, so the example marks inflation as the risk the traditional plan leaves in place.
Tenure decides the verdict
A final-salary formula rewards long service and penalizes an early exit, so the recommendation for this composite employee turns on how long she expects to stay.
Where marks go in FIN-355 Topic 1
Comparisons built as feature lists, vesting in one paragraph and loans in the next, lose the most, because they describe two accounts without ever saying who absorbs a bad outcome. A paper that calls the pension safe without noting that its fixed payment erodes with prices has removed one risk from the table by not looking at it. Treating an account balance as equal to the pension, dollar for dollar, ignores that a lump sum has to be stretched across a lifetime of unknown length. Employer failure left out, or stated as though benefits vanish with the sponsor, misreads federal pension insurance even at a descriptive level. Replacement arithmetic run at a single horizon hides longevity risk inside one figure. A verdict that never mentions the employee's likely tenure applies a general preference to a particular person.
Get a FIN-355 Topic 1 example written to your instructions
Send the FIN-355 Topic 1 instructions and the rubric from your classroom, with the plan descriptions or case your section provides. We write a custom example to them, with each risk assigned to the party that bears it, the pension converted into an equivalent balance at two horizons and the verdict tied to tenure, in 24 to 48 hours. The first one is free.
FIN-355 Topic 1 questions, answered
Is a pension always safer than an account plan?
Safer against some risks and not others. A pension lifts investment and longevity risk off the retiree, which is a large advantage, but a fixed payment loses purchasing power whenever prices rise, and a benefit based on final salary shrinks for anyone who leaves early. The example rates the two plans risk by risk, since a single safety verdict hides exactly the trade the topic is about.
What happens to a private pension if the employer fails?
Plan assets are held in trust apart from the employer, and a federal insurer, the Pension Benefit Guaranty Corporation, guarantees benefits up to limits set by law and adjusted over time. Many modest benefits sit inside the guarantee, while larger ones can be cut back. The example describes that protection in general terms and does not quote a guarantee figure, since the ceiling changes and depends on age and payment form.
Does the example recommend a plan for my own job?
No. The employee is a composite, the salary and multiplier are illustrative, and the verdict follows from the tenure the case assumes. Real plan choices depend on the actual plan documents, your expected career, other savings and a spouse's benefits, none of which a coursework example can see. It demonstrates the risk-by-risk reasoning FIN-355 asks for and is not retirement advice.