Why doesn RSP average annual success probability weighted with mortality data as some other programs do?
We believe using a target age is better for planning purposes. The problem with the actuarial approach is that it counts on the fact that one may die young and thus greater spending is allowed. The actuarial approach is appropriate for an insurance company which counts on people dying according to a certain distribution, they set their prices and their benefits accordingly, and, sure enough, their customers in aggregate die roughly on schedule. An individual is advised to cover as many likely scenarios (like living to age 90) as he can afford. ( 11/15/02 ) There is a lot of discussion in articles recently about using distributions for returns with fatter tails than the lognormal, distributions which allow for more extreme outliers. Should Monte Carlo retirement planners be using these distributions for returns? Research done in the ’60s by Fama and Mandelbrot indicated market returns are best fit to a logstable law with the alpha parameter set at about 1.7. The normal distribution has
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