7 Most Important Equations for Your Retirement: The Fascinating People and Ideas Behind Planning Your Retirement Income

by Moshe A. Milevsky

The 800 years of scientific breakthroughs that will help salvage your retirement plans Physics, Chemistry, Astronomy, Biology; every field has its intellectual giants who made breakthrough discoveries that changed the course of history. What about the topic of retirement planning? Is it a science? Or is retirement income planning just a collection of rules-of-thumb, financial products and sales pitches? In "The 7 Most Important Equations for Your Retirement...And the Stories Behind Them" Moshe Milevsky argues that twenty first century retirement income planning is indeed a science and has its foundations in the work of great sages who made conceptual and controversial breakthroughs over the last eight centuries.

In the book Milevsky highlights the work of seven scholars--summarized by seven equations--who shaped all modern retirement calculations. He tells the stories of Leonardo Fibonnaci the Italian businessman; Benjamin Gompertz the gentleman actuary; Edmund Halley the astronomer; Irving Fisher the stock jock; Paul Samuelson the economic guru; Solomon Heubner the insurance and marketing 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 baby boomers starting to hit retirement age, planning for retirement income has become a hot topic across the countryAuthor Moshe Milevsky is an internationally-respected financial expert with the knowledge you need to assess whether you are ready to retire or notPresents an entertaining, informative narrative approach to financial planning

Understanding the ideas behind these seven foundation equations--which Moshe Milevsky explains in a manner that everyone can appreciate--will help baby boomers better prepare for retirement. This is a book unlike anything you have ever read on retirement planning. Think Suze Orman meets Stephen Hawking. If you ever wondered what the point of all that high school mathematics was, Moshe Milevsky's answer is: "So that you can figure out how to retire...while you can still enjoy your money."

Genres: Nonfiction, Economics, Personal Finance, Business

224 pages, Hardcover

First published May 8, 2012

Reviews

[Laura (Kyahgirl) · Rating 5 out of 5]

I’m giving this book 5 stars because I enjoyed the Hoopla Audio version so much that it made me go out and buy a copy of the physical book for my library. For me, this book was the perfect combination of human interest, math geekery, and relevance to my own life. I loved learning about the 7 scholars behind the 7 important equations. The focus of this book is the equations, the people behind them, their application and relevance. Its not an investing book per se, even though there are various discussions about the stock market. This author is an professor of Finance at a Canadian university, but there is no focus on particular Canadian financial instruments or tax considerations. You would have to look elsewhere for that.

In this book, Milevsky builds the reader’s understanding of the topics as the book progresses so by the end, you can comprehend the application of all the concepts to the central question about retirement income planning. I appreciated in this book the fact that the author doesn’t do a lot of handwaving and giving vague, overly optimistic projections about money, investment growth, and a happy trip into the sunset. The tools are provided to get a good handle on your own situation, if you want to sit down and do the math (something I find kind of fun) or you can have an intelligent conversation with a financial advisor or actuary and have a chance of understanding what is being discussed.

I enjoyed the audiobook, even though its hard to look at formulae, tables and graphs in this format, because Al Kessel, the narrator, did a stellar job of presenting the book.

[Wladiana Lendengues · Rating 5 out of 5]

A ideia desse livro é focar em aspectos relacionados à aposentadoria e que não são tão abordados em muitos livros sobre finanças. Ele traz pontos bem relevantes sobre aposentadoria em si como: quanto devo ter de seguro de vida, como devo gastar o montante na aposentadoria, como calcular a chance de viver mais do que o dinheiro acumulado. Sem contar que mostra as equações utilizadas e explica passo a passo como aplica-las, além de ter uma explicação muito simples para entender função logarítmica.
Gostei que mostra uma abordagem bem diferente da comunidade FIRE (financeiramente independentes e aposentados cedo) ao discutir que, para quem não pretende se aposentar cedo porque gosta do seu trabalho, talvez não valha a pena sacrificar tanto no presente para alcançar um montante e viver apenas dos rendimentos, já que mostra como calcular a chance de viver até idade X.
Também mostra como seu capital humano pode ser usado para definir a alocação de investimentos e como deve levar em conta apenas a tolerância individual ao risco da investidora ao definir quanto em renda variável a investidora deve ter.
Porém, não é a ideia do livro mostrar como calcular quanto a investidora deve ter acumulado quando for se aposentar, nem quanto ela deve investir a cada mês ou ano para isso. O livro parte mais do pressuposto que a leitora já tem um certo montante acumulado e já sabe quais valores irá receber ao se aposentar.

[Greg · Rating 4 out of 5]

I really enjoyed this book. I've just completed an MBA in Finance and it was an interesting perspective on financial engineering and actuarial science. They don't teach you actuarial science in business school, so chapters 2-6 were new for me. I learned how to do NPV analysis in business school and I apply the tools I learned in modern portfolio theory to optimize my portfolio for retirement. This book fills the hole in figuring out if what I am doing will likely be enough. I'll be adding the analysis to my R programs for managing my investment portfolios.

The approach in the book is rather breezy and is a historical approach to the development of these equations presented in the book.

[Gary · Rating 3 out of 5]

This is not a book for everybody. It is for those who want to quantify what their financial retirement will look like. Even then, these are not easy formulas. Stephen Hawking said that for each equation in a book, you halve its sales. With seven of them, Milvesky may have troubles having this book be profitable,

Milvesky gives seven formulas ranging from a good algebra level formula to calculus. He examines probabilities on life expectancy, how much of my assets can I spend and when, as well as how should my assets be invested. On the later it is more conservatively vs aggressively, This is not a book you pick up to plan your retirement, but a book to help you understand if you are on the right track. It also is a book of probabilities than definites. It gives you the tools to say that things look like you are coming out OK vs you are going to be OK-it is important to know that distinction.

Milvesky does a good job of giving examples of how to use the formulas. He also goes through the people behind them as well. But I you really do need to be the type of person who enjoys equations in order to get through the book.

For more of my notes, please see my book blog.

[Adam McNamara · Rating 3 out of 5]

The Seven Most Important Equations for your Retirement introduces you to the ideas and people behind retirement planning. The premise sounded amazing. I love personal finance. I love math. I love history. The three together should have been a winning combination. However, the book failed to deliver.

Moshe doesn't bring these stories to life in the same way a Malcolm Gladwell would. Each biography feels underdeveloped, and therefore uninteresting. We get to learn what each contributor did, but not why they did it.

The mathematical examples used to illustrate each equation are unclear. Moshe uses examples from his own life, often skipping steps or omitting figures in his math to arrive at an answer. The reader is left feeling "Okay....but how does this work with my numbers?"

[Roger B · Rating 5 out of 5]

concise and illuminating descriptions of seven formulae that are used in retirement planning - i.e. annuities, present value, insurance, spending rates, asset allocation and the probability of ruin. the chapters on huebner, gompertz, samuelson and kolmogorov were very interesting. the chapters are organized in a conceptual order building on previous concepts taking the reader from fibonacci's determination of how long a pension will last to kolmogorov's differential equation for determining the chance one's retirement plan can be sustained (i.e. not be ruined by a downturn in the market). well written.

[Andre · Rating 4 out of 5]

What I liked about this book is not the actual equations, although as an engineering I do like equations. What I liked was that he places the foundations of retirement planning, in particular, the things you should consider, on a solid theoretical footing. Most common treatments are way to0 hand-wavey, finger in the air, "best practice" based.

Highly recommended as a good start in your thinking about retirement planning. And *that* should start the day after you get your first job and have some money to save.

[Rob Saunders · Rating 5 out of 5]

Thoroughly enjoyed this compelling and sensible approach as food for thought. Milevsky's explanations of the equations and their historical underpinnings was nicely presented. Well-written, useful, and easy to read.

[Roland Martinez · Rating 3 out of 5]

I made it through. It had some really interesting parts but overall I kept falling asleep like I used to when I read my economic history textbooks. I'd recommend it for someone considering retirement but the concepts are more important than the math.

[Dave · Rating 4 out of 5]

Not recommended as an audiobook because it is hard to visualize the equations, but an interesting and well researched history of personal financial planning. The chapter on life expectancy was especially eye opening and thought provoking.

[Jared · Rating 4 out of 5]

This book covers significant equations that relate to retirement. The author describes the historical roots of the equations, the lives of the people who set the stage for the equations, and the potential applications of the equations to retirement income planning.

If all of those aspects don't interest you, then this book may be a boring read. But if your curiosity has been piqued, then this book will be surprisingly captivating.

There are lots of surprising conclusions from the equations (e.g. stock allocation changes over a lifetime depend more on future earning potential than on perceived decreasing risk), so this book is a good counterpoint to some of the more commonly-referenced (but perhaps outdated) research around things like "safe withdrawal rates" and asset allocation "rules" like "your age in bonds."

[Jane · Rating 5 out of 5]

This is a surprising easy to understand book ... the concepts not necessarily the equations. For me, the best part is chapter 7 which covers sustainability of retirement savings. I have done a lot of reading in this area but this is the first time I have come across the approach. It is so logical. Why don't more financial planners use it? Don't expect a recipe for retirement planning. However, if you want to understand the essential elements of retirement planning and their historical origin, this book is highly recommended.

[Brian Connell · Rating 4 out of 5]

Enjoyed it. Milevsky picked 7 equations related to the question of determining how long retirement savings would last, and describes their application, origins and history. One chapter per equation. The equations build from straight forward calculations of how long an amount will last at a given return and withdrawal rate, to conclude in the final chapter with calculations of how probable a nest egg will be sustainable based on a number of variables (including some interesting mortality rate stats described in an earlier chapter). Fun stuff - made me wonder if I should have been an actuary.

[Victoriab · Rating 5 out of 5]

I love the biographical details provided behind the "great names." The author explains very clearly why each of the equations is so important, and then takes a few "what if" numbers and runs them through("what if you live to be 95 and need more than $25,000 a year to live on?"). The scenario calculations are typical for retirement planning workbooks, but it's the historical asides that make the book such a delight to read.