Article Abstract:
The article discusses the 1995 Survey of Consumer Finance along with statistical analysis of retirement software to examine whether consumers who follow the software retirement savings parameters are saving enough for retirement. The salient characteristics of most commercially available financial planning software is that it employ a straightforward actuarial approach to determine necessary wealth accumulation. This program is intuitively appealing in, as it does not require detailed knowledge of an individual's preferences. The strength of planning software is to take what can be a very complicated set of environmental rules, assumptions and expectations, and use a well defined process to quickly produce a result that can help user save more efficiently. Patterns in the data from the software simulation appear to reflect changes in the household balance sheets of various demographic groups within the population. Finally, among those who fail to fund retirement expenses, the present value of unfunded living expenses is, at the median, equivalent to 17% of current consumption.
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Article Abstract:
Using data from the 1998 Survey of Consumer Finances, the study reviews financial preparedness for retirement, finding that the wealthiest and most educated made the most gains, while 44.5% of middle-class Americans are not saving enough to fully fund retirement. Results of the 1998 study show that 4.0% more Americans will not sufficiently fund their retirements than were found in the 1995 study. One caution in the findings is that the software used is demonstrates how sensitive the retirement savings are to stock market value fluctuations.
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Article Abstract:
The challenging role that insurance especially life annuities plays in solving the retirement income problem and the theoretical arguments and empirical studies showing the importance of annuities are discussed. Greater annuitization will help more Americans to have a good lifestyle after retirement and avoid them liquidating their assets as their life expectancy is increasing.
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