Traditionally, Tables Have Been Prepared Showing How Long IRA Funds

question 3

Multiple Choice

Traditionally, tables have been prepared showing how long IRA funds will last based on rates of return and annual withdrawal rates. These tables, however, assume constant returns over the projection period. Many financial planners are now using a technique that allows for fluctuations in market returns. A computer is programmed to estimate how long funds will last under many different return scenarios and to determine the probability that funds will last until a specified age. This technique is called

• A) decision-tree analysis.
• B) sensitivity analysis.
• C) computer simulation.
• D) cost-benefit analysis.

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