probability_ruin: Calculate the probability of retirement ruin

In p0bs/p0bservations: Assorted Functions and Observations by P0bs

Calculate the probability of retirement ruin

Description

This function uses the Milevsky-Robinson to analyse the probability of retirement ruin, by parsimoniously meshing investment risk and return, mortality estimates and spending rates without resorting to opaque Monte Carlo simulations. For further details, see: Milevsky, M. and C. Robinson; "A Sustainable Spending Rate without Simulation"; Financial Analysts Journal, Volume 61, Number 6. (2005). Please note that these are approximations, so do not rely on them for financial returns or planning.

Usage

probability_ruin(
  return_expected,
  return_sd,
  life_remaining_expected,
  rate_spend
)

Arguments

return_expected	The expected real return of the entire pension portfolio
return_sd	The projected standard deviation of the returns of the entire pension portfolio
life_remaining_expected	The median projected remaining lifespan of the individual in question
rate_spend	The annual spending rate applied by the individual to their pension portfolio

Examples

probability_ruin(
  return_expected = 0.07, 
  return_sd = 0.2, 
  life_remaining_expected = 28.1, 
  rate_spend = 0.05
  )

p0bs/p0bservations documentation built on Nov. 14, 2024, 5:09 a.m.