A1. When ROR falls by 1% to 5%, the retirement annuity falls from $192,244 to $149,855 (i.e., by 22.45%). To restore this annuity, the savings rate must rise by 4.24 percentage points to 19.24%. With this savings rate, the entire loss of 1% in ROR falls on consumption during the earning years.
A2. Intuition suggests you need to keep the real rate (2.91%) constant, that is, increase the nominal rate to 7.03% (confirm this). However, this will not be sufficient because the nominal income growth of 7% has a lower real growth when inflation is higher. Result: You must increase the real ROR to compensate for a lower growth in real income, ending with a nominal rate of 7.67%.
A3. There are two components to the risk of relying on future income: disability/death and career failure/unemployment. You can insure the first component, but not the second.
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