totalCF: Total Cash Flow Calculation

In sstoeckl/pensionfinanceLi: Optimal Pension Decisions in Liechtenstein

Description

This function calculates the total cash flows (for each scenario and working age/retirement) given all input parameters needing all previously defined functions

Usage

totalCF(
  ret_age,
  w3,
  c,
  c2,
  nu2,
  nu3,
  c_age,
  gender,
  w0,
  CF = NULL,
  li,
  lg,
  c1,
  s1,
  s2,
  s3,
  w2,
  rho2,
  rho3,
  ret,
  retr,
  psi,
  alpha,
  warnings = TRUE
)

Arguments

ret_age	Decision Variable: retirement age, can be set anywhere between 60 and 70 (default: 65)
w3	Decision Variable: third pillar portfolio allocation (given either as vector or as matrix with entries) for all years
c	Decision Variable: fraction of income that is consumed while still working (current assumption: constant)
c2	Decision Variable: second pillar savings as fraction of gross income (still missing: health, a-fonds-perdu payments)
nu2	Decision Variable: fraction of second pillar savings that is converted to life-long pension
nu3	Decision Variable: fraction of third pillar savings that is converted to life-long pension
c_age	Given variable: the investor's current age (assuming birthday is calculation-day)
gender	Given variable: gender, 0=male and 1=female
w0	Given variable: time c_age wealth that is not disposable, assumption: still available at retirement (no growth or decline), alternatively: expected wealth (that is not disposable) at retirement, stays the same over time
CF	Given Variables: income shocks, such as inheritance (not currently implemented)
li	Given variable: gross labor income at time 0 (in the last year before birthday)
lg	Given variable: labor growth rate (in real terms, constant)
c1	Given variable: first pillar savings as fraction of gross income
s1	Given variable: vector consisting of two components: c(number of contribution years at age=c_age,historical average yearly income until c_age)
s2	Given variable: savings in second pillar as of t=0
s3	Given variable: liquid wealth - invested in the third pillar (current assumption: no tax advantage for third pillar)
w2	Given variable: portfolio allocation in second pillar (assumed to be fixed and not influenced by the decision maker)
rho2	Given variable: conversion factor in second pillar for regular retirement age
rho3	Given variable: conversion factor in third pillar for regular retirement age
ret	Given variable: investment return scenarios (nominal)
retr	Given variable: investment return scenarios (real)
psi	Given variable: optional, spread to take a loan/leverage for third pillar savings
alpha	Decision Variable: parameter to choose fraction of wealth NOT consumed during retirement but kept for investment (and subsequent consumption)
warnings	optional: should warnings be given? (default=TRUE)

Value

returns a list with three elements: - a matrix of consumptions before and after retirement (dim c_age:122, # of scenarios) - a matrix of wealth after retirement (dim ret_age:122, # of scenarios) - a matrix of wealth before retirement (dim c_age:(ret_age-1), # of scenarios)

Examples

data(ret);data(retr)
totalcf_ex <- totalCF(ret_age=65,c_age=42,
                w3=setNames(c(.25,.25,.25,.25,0),c("msci","b10","recom","libor","infl")),
                c=0.6,c2=.12,nu2=.5,nu3=0.01,gender=0,
                w0=300000,li=100000,lg=0.01,c1=0.07,s1=c(15,80000),s2=300000,s3=300000,
                w2=setNames(c(.30,.30,.30,.10,0),c("msci","b10","recom","libor","infl")),
                rho2=0.05,rho3=0.04,ret=ret[,,1:10],retr=retr[,,1:10],psi=0.015,alpha=0.96)
totalcf_ex2 <- totalCF(ret_age=65,c_age=64,
                w3=setNames(c(1,0,0,0,0),c("msci","b10","recom","libor","infl")),
                c=1,c2=0,nu2=0,nu3=0,gender=0,
                w0=0,li=100,lg=0,c1=0,s1=c(0,0),s2=0,s3=0,
                w2=setNames(c(0,0,0,1,0),c("msci","b10","recom","libor","infl")),
                rho2=0.01,rho3=0.01,ret=ret[,,1:10],retr=retr[,,1:10],psi=0.015,alpha=0.96)

sstoeckl/pensionfinanceLi documentation built on Dec. 2, 2020, 3:26 a.m.