The Calculus of Retirement Income: Financial Models for Pension Annuities and Life Insurance [Hardcover]

Moshe A. Milevsky (Author)

Book Description

ISBN-10: 0521842581 | ISBN-13: 978-0521842587 | Publication Date: March 13, 2006

The book introduces and develops the basic actuarial models and underlying pricing of life-contingent pension annuities and life insurance from a unique financial perspective. The ideas and techniques are then applied to the real-world problem of generating sustainable retirement income towards the end of the human life-cycle. The role of lifetime income, longevity insurance, and systematic withdrawal plans are investigated in a parsimonious framework. The underlying technology and terminology of the book are based on continuous-time financial economics by merging analytic laws of mortality with the dynamics of equity markets and interest rates. Nonetheless, the book requires a minimal background in mathematics and emphasizes applications and examples more than proofs and theorems. It can serve as an ideal textbook for an applied course on wealth management and retirement planning in addition to being a reference for quantitatively-inclined financial planners.

Editorial Reviews

Review

"This very readable book is a landmark in the area of life insurance, pensions and long risk analysis. Integrating actuarial and financial approaches, the book provides an approach which is both theoretically elegant and practical in applications. It is highly recommended for both academics and those in industry." -Michael Orszag, Watson Wyatt

"Millions of baby boomers turning 60 have suddenly awakened to the need to protect their retirement futures. The Calculus of Retirement Income is a useful tool for those devising sensible financial plans and helping manage wealth in the face of capital market and mortality risk. Witty, serious, and entertaining at the same time, the volume will be an invaluable resource for actuarial and financial students, practitioners, and researchers interested in actuarial and financial strategies to avoid ruin." -Olivia S. Mitchell, The Wharton School

"This is a wonderful reference book for anyone interested in the quantitative modeling of pensions and retirement income. I plan to use it in the course in advanced topics in investing that I teach to MBAs at Boston University." -Zvi Bodie, Boston University

"Almost everyone needs to plan for retirement. But investment planners and actuaries can rarely share their expertise. Moshe Milevsky mathematically puts it altogether, while still making his book accessible to students and quantitatively oriented professionals. Wonderful as a text or reference book!" -Roger Ibbotson, Chairman of Ibbotson Associates and Yale University

"Dr. Moshe Milevsky has just published a book any serious financial advisor should read...Milevsky has long been one of the most compelling theorists on calculating the odds of outliving one's money...this book should make the average financial professional feel humble. In contrast to the knee-jerk platitudes so many industry members dispense to clients, Milevsky delivers page after page of solid financial analysis. Even those who can follow the math will be hard-pressed to answer the problems he poses at the end of each chapter." -Jonathan Chevreau, Financial Post

"...this book has a unique approach in that it normatively explores how to structure financial issues during the retirement period...This volume is a must-have for anyone interested in quantitative financial planning." -Raimond Maurer and Wolfram Horneff, Journal of Pension Economics and Finance

Book Description

This book develops the underlying mathematical framework to combine investment with the uncertainty of mortality. The results, formulas and examples should also help retirees better manage their financial affairs, in addition the instructors teaching their material to the next generation of financial advisors.

See all Editorial Reviews

Product Details

• Hardcover: 352 pages
• Publisher: Cambridge University Press (March 13, 2006)
• Language: English
• ISBN-10: 0521842581
• ISBN-13: 978-0521842587
• Product Dimensions: 9.1 x 6.3 x 0.5 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,038,718 in Books (See Top 100 in Books)
  • #63 in Books > Business & Investing > Industries & Professions > Insurance > Life

More About the Author

Moshe A. Milevsky is one of the most sought-after speakers in North America on issues related to investment management, retirement planning and longevity annuities. Dr. Milevsky is the Executive Director of the Individual Finance and Insurance Decision (IFID) Centre and is an Associate Professor of Finance at York University in Toronto, Canada. He is also the CEO and President of The QWeMA Group, which is a software company that develops proprietary retirement income analytics. In addition to being an award-winning teacher and author he has served as a consultant and advisor for a variety of financial services companies and pension funds. He has published six books and over 50 peer-reviewed articles and has been interviewed and quoted in Business Week, the Wall Street Journal and Money Magazine amongst others.

Customer Reviews

Most Helpful Customer Reviews

4 of 4 people found the following review helpful:

4.0 out of 5 stars Valuable insight into retirement math, October 5, 2008

By 

Larry R Frank Sr, MBA, CFP (Rocklin CA) - See all my reviews

This review is from: The Calculus of Retirement Income: Financial Models for Pension Annuities and Life Insurance (Hardcover)

I had purchased this book when if was first published and have now come back to it after reading his recent work (link below). This earlier book is a very detailed discussion of the computations that go into the question of retirement income. For those who are math oriented, this is a good book to begin to get insight into solving the retirement income question. He has a supporting website at [...].

For those who would like to have insight into how to apply this math, his more recent book Are You a Stock or a Bond? Create Your Own Pension Plan for a Secure Financial Future will help, and it is an easier read for most, especially the non math oriented.

As a holder of a physics degree, the math so far applies to static periods, i.e. considering what age a person currently is (t for time is static). However, the time period continually decreases since longevity is continually shortening as a person ages. Therefore, the time should be evaluated as delta t or changing time. In practice, I see this difference between ages emerge as I evaluate different situations. Readjusting the formula for each age, as one ages, does not work since in practice this results in taking more out early and having to retrench later.

However, getting deeper insight into the mathematical approach is extremely enlightening and useful to those who are so oriented.

Wealth Odyssey: The Essential Road Map For Your Financial Journey Where Is It You Are Really Trying To Go With Money?

5.0 out of 5 stars One of a kind, November 2, 2011

By 

Finance practitioner (Europe) - See all my reviews

Amazon Verified Purchase

This review is from: The Calculus of Retirement Income: Financial Models for Pension Annuities and Life Insurance (Hardcover)

I read the book from front to cover. It's combination of actuarial principles and the application to highly relevant retirement issues is unique. Most of the actuarial books are impossible to read even for well trained economists. A way to keep consulting income for actuaries? There is a huge gap between finance people and insurance guys. Milevskys book is a long needed and important step to bring those two branches closer together - to start solving real problems in real life. A must have on the desk of financial planners, retirement economists and bankers looking for problems which are difficult but relevant in application.

10 of 16 people found the following review helpful:

3.0 out of 5 stars Where is the additional material?, May 7, 2006

By 

Ken "ken" - See all my reviews

This review is from: The Calculus of Retirement Income: Financial Models for Pension Annuities and Life Insurance (Hardcover)

I purchased this book over a month ago. I expected to receive additional supporting materials which would greatly aid my understanding of the various formulas used throughout the book. The additional supporting material has yet to be posted. As such, currently, i feel i have been overpromised and underdelivered.