Using simulation as a tool in selecting a retirement age under defined benefit pension plans |
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Authors: | Richard F Bieker |
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Institution: | (1) School of Management, Delaware State University, 19901 Dover, DE |
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Abstract: | This paper examines how simulation modeling can be used to select a retirement age under defined benefit pension plans. This
approach construes the variables affecting pension benefits as probabilistic variables. Simulations are then run to generate
probabilistic values for the real value of pension benefits for alternative retirement ages. By construing variables affecting
pension benefits as probability distributions, this approach reflects the uncertainty facing individuals contemplating retirement.
By generating estimates of retirement benefits as probability distributions rather than as single deterministic values, the
model provides individuals with a more realistic and complete frame of reference for making the retirement decision.
The author is grateful to an anonymous referee and Joachim Zietz. JEF editor, for helpful comments. |
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