R16- Exhibit 3 understand, numbers

bchadwick

Does anyone understand Exhibit 3 in Reading 16? I don't get the idea what stands behind these numbers.
Please help.

oneboy

probability of ruining one's nest egg if spending is continued.

e.g. a 65 year old male, retiring today can spend 4% of his nest egg - and if he does so, there is a 9% probability that he will be ruined.

if he spent 5% instead - his chance of getting ruined is 15.8%.

CP

Valores

I do not think there is enough material available to calculate those. and if you read the paragraph on pg 231 at the bottom, they mention: Milevsky and Robinson.... developed a method to calculate sustainable .... Exhibit 3 represents an example of Ruin probab....
(it is a substitute of the monte carlo simulation).

takeaway - a lower ruin probability means the spending rate is sustainable....

CP



Edited 1 time(s). Last edit at Thursday, January 20, 2011 at 07:30AM by cpk123.