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The 7 Most Important Equations for Your Retirement: The Fascinating People and Ideas Behind Planning Your Retirement Income Hardcover – May 8, 2012

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Editorial Reviews

From the Inside Flap

Where do all these numbers come from?

If you have spent any time at all planning for retirement, you have probably come across an assorted collection of numbers. Some of these numbers are very large, like how long you might live, or how much money you will need to retire comfortably. And, some of these numbers are very small, like the interest you are earning in the bank, or how long your money will last if the stock market takes a tumble at the wrong time. But, have you ever stopped and asked yourself: Where do all these numbers come from? Who created the underlying calculations? When were they discovered and how long have they been around? Do they have a proven track record? Well, you might be surprised to learn that the stories behind your numbers may be a lot more interesting than the numbers themselves.

For example, did you know that:

  • The value of a pension was first discovered by a comet-chasing astronomer following his father's suspicious death and a plot to kill the King of England?

  • The first calculation for how long your retirement nest egg will last was conceived over 800 years ago by an Italian merchant traveler best known for an obsession with rabbits?

  • The most famous mathematical model of human mortality was formulated by an Englishman who wasn't allowed to attend university?

  • Your stockbroker's very capitalistic plan to help you retire rich is based on an algorithm designed by the greatest Russian mathematician ever, who was a communist and Soviet hero?

Moshe Milevsky, bestselling author and internationally-renowned retirement quant, explains to the rest of us the work of seven scholars—summarized by seven equations—who shaped all modern retirement calculations. He tells the stories of Leonardo Fibonacci the Italian businessman; Benjamin Gompertz the gentleman actuary; Edmund Halley the astronomer; Irving Fisher the doomed stock picker; Paul Samuelson the economic guru; Solomon Huebner the insurance visionary, and Andrey Kolmogorov the Russian mathematical genius—all giants in their respective fields who collectively laid the foundations for modern retirement income planning.

With remarkable narratives that span several continents and 800 years of history, The 7 Most Important Equations for Your Retirement focuses on universal concepts and big-picture concerns, which help you first appreciate and then figure out how to retire while you can still enjoy your money.

From the Back Cover

From the introduction: An equation can't predict your future . . . But it can help you plan for it

Most books about retirement planning are written as guides, instruction manuals or "how-to" books. The authors tell you what to do, when to do it, and what to expect. I know this quite well because I have authored many such tomes myself.

Rest assured, this is not one of those books.

This book tells stories which I hope will lead into conversations. It is a narrative involving seven people, their discoveries and the conceptual innovations that made it possible for you to stop working and enjoy the money you have accumulated, one day. These protagonists—or scientific heroes—didn't achieve their breakthroughs while hunched over a laboratory workbench, peering through a microscope or trekking through jungles. They made their discoveries sitting in front of a blank sheet of paper, but while thinking very carefully about life and money. And, like the greatest thinker of them all, Albert Einstein, they too expressed their discoveries using a very beautiful language called mathematics. Alas, the seven equations profiled in this book aren't as famous or as elegant as the simplicity of E = MC 2, but they are far more practical for your retirement.

Yes, I know from many years of teaching experience that financial conversations are often dry and humorless. So I promise to do my best to lighten up the topic by keeping the technicalities to a minimum and focusing on the art.

"Art," you say?

Yes. In my mind, famous equations are like beautiful Picassos. Even if I don't quite understand the painting or the mathematics I can certainly appreciate the beauty and genius behind it. The seven equations presented in this book typify, at least for me, the conciseness, elegance and beauty that the best of the best equations demonstrate. By the end of this book, if you're not already inclined to appreciate mathematical equations for what they are, I hope you'll agree about the beauty.

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Product Details

  • Hardcover: 224 pages
  • Publisher: Wiley; 1 edition (May 8, 2012)
  • Language: English
  • ISBN-10: 1118291530
  • ISBN-13: 978-1118291535
  • Product Dimensions: 5.7 x 0.8 x 8.8 inches
  • Shipping Weight: 1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (27 customer reviews)
  • Amazon Best Sellers Rank: #101,152 in Books (See Top 100 in Books)

More About the Author

Moshe A. Milevsky in an Associate Professor of Finance at the Schulich School of Business and a member of the Graduate Faculty in the Department of Mathematics and Statistics, at York University in Toronto. He has an M.A. (1992) in Mathematics and a Ph.D. (1996) in Finance. He is the executive director of the non-profit IFID Centre at the Fields Institute, and the CEO of the QWeMA Group, which is a software company that develops IP and algorithms for the financial services industry. He has published 10 books and over 60 peer-reviewed articles on all aspects of financial planning. He has delivered over 1,000 seminars and keynote presentations around the world and is currently working on his next book manuscript (tentatively) entitled: TONTINES for the 21st CENTURY: The Fascinating Past and Future of a Product that Can Help Save Retirement.

Customer Reviews

Most Helpful Customer Reviews

21 of 22 people found the following review helpful By Robert Kirchner on May 29, 2012
Format: Hardcover Verified Purchase
I believe this is an interesting read if you are interested in financial planning, but it is definitely not a how-to-invest for retirement book. Instead it's a playful Milevsky telling the stories of some of the historical figures who helped shape modern retirement planning with their break thru contributions to finance. The seven equations aren't exactly as the seven original thinkers wrote them, but how Milevsky thinks the equations would be written if these visionaries were writing today.

The book begins with Fibonacci in Italy 800 years ago introducing present value calculations into financial math. Fibonacci, we also learn, tried to convince those dealing with math calculations in commerce in 13th century Italy to switch from using Roman numerals when doing calculations to the Hindu-Arabic numeral system. Milevsky reports that rivals of Fibonacci did not take kindly to his radical idea of switching from Roman numerals, and had the new number system banned. Even 300 years later in the mid 1500s merchants in Frankfurt, Germany, introduced legislation to have the radical new number system banned.

The book then moves to Gompertz in England in the early 1800s and the Gompertz function and the law of mortality. What Gompertz discovered was that the mortality rate for populations increases year by year by an average of about 9% over a wide range of years. So for instance if a population has a 10% chance of dying at age 65, the survivors will have about a 10.9% chance of dying at age 66, and those survivors will have about about 11.8% chance of dying at age 67, and so on and so forth. There is apparently a careful script the Grim Reaper follows. We also learn that at very advanced ages this breaks down.
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9 of 9 people found the following review helpful By George Poirier on July 18, 2012
Format: Hardcover
Reading books on finance can be a harrowing experience for the uninitiated. This is certainly not the case for this book. The author, an expert in the field, gently guides the reader through seven equations that can have a most illuminating effect on anyone's retirement plan. Each factor/variable in each equation is carefully explained; then plenty of useful examples are given for illustrative purposes. As a bonus, the author provides brief overviews of the lives of the individuals responsible for the subject equations - individuals whose collective work was done over a period spanning from the thirteenth century to the twentieth.

The author's prose is exemplary as far as clarity and friendliness are concerned. It is also lively, authoritative and, yes, even quite captivating at times for a book on finance. This is a book that can not only be enjoyed but carefully studied and used by anyone planning a happy, financially worry-free retirement.
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8 of 8 people found the following review helpful By Wade D Pfau on June 26, 2012
Format: Hardcover
With The 7 Most Important Equations for Your Retirement, Moshe Milevsky has written in the style of my favorite genre of book about my favorite research topic. It's fertile ground for me to like the book.

About the genre, I like reading about the history of people and ideas who've shaped our modern world. You can see this approach in books such as Robert Heilbroner's The World Philosophers, Peter Bernstein's Capital Ideas, Justin Fox's The Myth of the Rational Market, Niall Ferguson's The Ascent of Money, countless books by Bill Bryson including, in particular, A Short History of Nearly Everything, as well as television series such as James Burke's Connections. I really have a soft spot for these sorts of works.

Though it would be nice to see what Bill Bryson could have done with the same source material, and comparing the biographical sketches about Irving Fisher presented by Justin Fox and Moshe Milevsky shows the some of the missing potential for really helping us to feel a connection to life and times of the thinker, I do think that Moshe Milevsky pulled off a really difficult feat. That is, he wrote in an entertaining manner about these historical figures in a respectable way. This is an extra special feat for Milevsky, because he is really showing his versatility by branching off to a new style of writing. Even if it hadn't worked, he can always fall back on being the world's leading researcher and authority on retirement income strategies.

The book works very well, building up the intuition behind key results, and culminating in a chapter which essentially provides the intuition for one of Milevsky's important research papers, "A Sustainable Spending Rate without Simulation," from a 2005 issue of Financial Analysts Journal.
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7 of 8 people found the following review helpful By D. Clarke on August 18, 2012
Format: Hardcover Verified Purchase
Milevsky writes clearly and entertainingly but the book falls short in each of its three major areas. As biography and history of major figures in mathematics and finance the material amounts only to a few pages for each individual which will not be nearly enough for those interested in history.

For those looking for information to help plan their retirement finances, the equations are relevant and interesting but their presentation is sometimes flawed. For example, the Samuelson chapter does not provide enough information to fully support an idea that is contrary to prevailing wisdom. The usual concept is that the decline in volatility of stock market returns when stocks are held for longer periods of time justifies holding more stock when you have a long time horizon. Samuelson's notion is that this benefit of reduced volatility over time is canceled if you are risk averse. Samuelson's equation for this produces some numbers that even Milevsky describes as "insane" and needs more justification and explanation. Milevsky also mentions the key concept of the impact of an up vs down stock market early in your retirement but never elaborates on this essential point.

As a math book the text is more successful but the Kolmogorov chapter is flawed by departing from the straightforward high school math of the earlier chapters. It would be challenging to implement the Kolmogorov equation on a spreadsheet.

The book tries to blend history/biography, finance/retirement and mathematics but 180 pages of main text is too short to do them justice.
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