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Retirement planning, in a financial context, refers to the allocation of savings or revenue for retirement. The goal of retirement planning is to achieve financial independence. The process of retirement planning aims to: [1] Assess readiness-to-retire given a desired retirement age and lifestyle, i.e., whether one has enough money to retire
Retirement plans are classified as either defined benefit plans or defined contribution plans, depending on how benefits are determined.. In a defined benefit (or pension) plan, benefits are calculated using a fixed formula that typically factors in final pay and service with an employer, and payments are made from a trust fund specifically dedicated to the plan.
The predominance of naive investors underscores the necessity for state programs and financial firms to guide individuals toward effective retirement planning. In Chapter 8, the authors introduce the concept of " new paternalism ", illustrating the crucial role of private and public agents in assisting individuals to make sound investment choices.
The appeal of retirement age flexibility is the focal point of an actuarial approach to retirement spend-down that has spawned in response to the surge of baby boomers approaching retirement. The approach is based on personal asset/liability matching process and present values to determine current year and future year spending budget data points.
Financial Engines was founded in 1996 [14] by Nobel Prize-winning economist William Sharpe, [15] Stanford Law professor Joseph Grundfest, and attorney Craig W. Johnson. [16] In 1998, it offered its first retirement planning and fund picking software.
Often retirement plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement. It is a tax deferred savings vehicle that allows for the tax-free accumulation of a fund for later use as retirement income.
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