ABSTRACT
Retirement planning can be greatly facilitated by using models. People need to make complex and interdependent decisions regarding how much to save for retirement, when to retire, and what lifestyle to enjoy after retirement. We developed a fairly simple model in Chapter 1 for a 30-year-old person beginning a new retirement account (though our model can readily be adapted to a number of different characteristics). This model, however, is only taking into account an “expected” case and is of limited use because it omits the reality that there are many uncertainties that are critical to making retirement plans. As the required disclaimer states, “Past performance is no guarantee of future results.” We all know that investment returns are uncertain. Similarly, we know that health and employment are also uncertain and this should be accounted for in our planning.
