PERSONAL FINANCIAL PLANNING: A STUDY ON POST RETIREMENT INCOME

Abstract

The uncertainty about the amount of income for the retirement stage may lead na individual to implement a capital accumulation plan in order to guarantee beforehand the desired income. This study approaches a series of factors that influence this decision making process: the person’s income, his or her attitude towards consuming and saving, and the investment possibilities in the financial markets. The study also aims at analyzing the actuarial models used to calculate the amount to be saved so as to generate income at the retirement stage. In the models that are presented, the individual chooses the type of contribution, the type of income and the rate of interest. Based upon these premises, the amount to be saved is calculated, bearing in mind the expected income. In order to calculate the probability of the occurrence of the expected income, each plan is simulated in two different scenarios: (a) for a specific age, also taking into account the investment of the accumulated fund (only in risk free assets) and, (b) allowing the investment in risky assets. It is noted that a conservative attitude towards the choice of the interest rate, that is, the preference for a lower interest rate, approximates the simulated and the expected results. It is also noted that the accumulated capital investment in risk asset contributes, in general, for the improvement of the final results, in the simulated plans and scenarios.