Patent ID: 8781937

Claim:
A computer implemented method for calculating, by a computer processor, an optimal withdrawal amount from a retiree's portfolio accounts consisting of financial assets, the method comprising the steps of: Retrieving a current value of assets of the retiree pre-determined to be relatively risky, and a current value of assets of the retiree pre-determined to be relatively safe; Retrieving total after-tax amount of pension and annuity funds receivable by the retiree per time unit, which is referred to as Pie; Calculating financial wealth of the retiree at time 0, which is referred to as W(0), as the sum of the current value of the relatively risky assets and the current value of the relatively safe assets; Retrieving a valuation rate, which is referred to as R, of the retiree; Calculating the retiree's level of longevity risk aversion, which is referred to as LRA; Calculating, by the processor, the retiree's optimal wealth depletion time, which is referred to as WDT, by solving the equation OWA(WDT)−Pie=0, where OWA(T) is the retiree's estimated optimal withdrawal amount at time T, and OWA(T) is calculated by performing the steps of: calculating actuarial present value for time T, which is referred to as APVX(T); calculating A0=Pie/R; calculating A1=EXP(R*T); calculating N1=(W(0)+A0)*A1−A0; calculating D1=APVX(T)*A1; retrieving a subjective discount rate, which is referred to as SDR, of the retiree; calculating K=(R−SDR)/LRA; calculating A2=EXP(K*T); calculating A3=the conditional probability of the retiree surviving for T time units; calculating A4=A3^(1/LRA); and calculating OWA(T)=N1/D1*A2*A4; Calculating, by the processor, the retiree's optimal withdrawal amount at time 0, which is referred to as OWA(0), by performing the steps of: Calculating B1=EXP(R*WDT); Calculating N2=(W(0)+Pie/R)*B1−(Pie/R); Calculating actuarial present value for time WDT, which is referred to as APVX(WDT); and Calculating OWA(0)=N2/APVX(WDT)/B1; and Displaying or communicating the value of OWA(0) to the retiree.