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# What does a pension actuary do

What exactly does "actuarial services" mean?

An actuary is a business professional, similar to an accountant or an attorney. But unlike those professionals, the actuary's job is to place dollar values on future contingent life events, such as death, disability, longevity, or retirement. Actuaries study probability and statistics, and obtain education and licensing credentials from several sources, including the federal government.

Here are some of the many things actuaries do:

Calculate the amount your employer must contribute to the pension plan each year. Actuarial consulting firms are retained by employers for this purpose.

Calculate the price you should be charged for an insurance premium. for all types of insurance. Actuaries who work for life, health, and casualty companies perform these calculations. (And you thought insurance companies just MADE UP those high premiums?)

Determine the amount of risk an insurance company can take on, and reinsure the rest. Actuaries who do this work in the reinsurance business.

Calculate the amount of lump sum benefit payable to someone terminating from a pension plan. Consulting actuaries perform these calculations.

Separate the spousal benefit from a pension benefit in a divorce settlement. Suppose one party worked for Boeing for 10 years while married. The other spouse has a 50% interest in the benefit from the Boeing pension plan. An actuary is needed to place a value on the spouse portion in order to carve the benefit out of the estate.

Compute the equivalent amount of an estate trust that will be inherited by a series of heirs to the estate. Suppose a trust pays \$1,000 per month to an heir, with the proviso that any

amount remaining upon the death of the heir goes to a second heir. The actuarial value of the second heir's interest can be determined actuarially and sold out of the estate.

Perform an actuarial balance forecast for a Continuing Care Retirement Community (CCRC). A CCRC is a full-time resident facility for retired people, with additional health services provided. Since most residents will live at such a facility for the rest of their lives, an actuary is required to determine the expected future revenues and expenses.

Assistance with retirement planning and investment education. If you are wondering about which pension option to take upon retirement, or whether to retire now or later, an actuary can help you decide. For example, is it wiser to take a pension of \$2,500/month at age 65 as a life annuity, or take \$2,200 at age 62 with 50% going to your spouse at death? Actuaries are called upon to help make these decisions.

Calculate the value of lost income in event of disability or death. Frequently this value is needed by the court in a wrongful injury or death case.

Assistance with financial forecasts that involve expected mortality or longevity. Actuaries work for the Social Security system to make long-range financial forecasts for the system.

Other problems relating to life, death, retirement, remarriage, or other demographic events. Actuaries are skilled professionals who merge knowledge of the economy, interest rates, and demography. If you ever think you might need the help of an actuary, YOU PROBABLY DO!