Optimal Life Cycle Savings

FINANCIAL COUNSELING AND PLANNING, Vol. 6, 1995

Posted: 14 Jul 1998

See all articles by Sherman D. Hanna

Sherman D. Hanna

Ohio State University (OSU)

Jessie X. Fan

University of Utah

Y. Regina Chang

University of Missouri at Columbia - College of Human Environmental Sciences - Department of Consumer & Family Economics

Abstract

How much should a family save for retirement? A prescriptive life cycle savings model is presented. Scenarios are developed with simulations to provide implications for personal financial planning. The percent of income to save today depends on the expected lifetime non-investment income pattern. Households who are sure that their real incomes will increase substantially in the future may be rational in not starting to save for retirement until 25 years before retirement. With uncertain future incomes and retirement ages, saving early may be rational. A computer program based on this model has been used in financial planning classes.

JEL Classification: D91, J26

Suggested Citation

Hanna, Sherman D. and Fan, Jessie X and Chang, Y. Regina, Optimal Life Cycle Savings. FINANCIAL COUNSELING AND PLANNING, Vol. 6, 1995. Available at SSRN: https://ssrn.com/abstract=6994

Sherman D. Hanna (Contact Author)

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

Jessie X Fan

University of Utah ( email )

225 S 1400 E AEB 228
Salt Lake City, UT 84112-0080
United States

HOME PAGE: http://www.fcs.utah.edu?~fan

Y. Regina Chang

University of Missouri at Columbia - College of Human Environmental Sciences - Department of Consumer & Family Economics ( email )

Columbia, MO 65211
United States
314-882-9343 (Phone)
314-884-4807 (Fax)

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