Patent ID: 8239307

Claim:
A computer-implemented method of generating a financial plan for an individual, comprising: performing, via a processor, the steps of: computing a utility function for an individual by calculating: T ⁢ ⁢ U ⁡ ( W ) = C ⁡ [ T - ln ⁡ ( rTW + S ) - ln ⁡ ( rW + S ) ln ⁡ ( 1 + r ) ] , where TU(W) is time utility as a function of wealth, C is a target annual consumption during retirement for the individual, T is a life expectancy of the individual less the current age of the individual, r is an estimated total annual return on investments, TW is a retirement wealth for the individual, S is annual savings of the individual, and W is a current wealth of the individual, wherein the retirement wealth is a target wealth for the individual at the beginning of retirement; calculating a critical wealth of the individual, the critical wealth comprising a wealth of the individual at an inflection point of the utility function for the individual; determining whether said individual is in a wealth maximizing phase or a critical wealth phase, said determining step comprising, categorizing said individual in a wealth maximizing phase if said individual has a current wealth equal to or greater than said critical wealth, and categorizing said individual in a critical wealth phase if said individual has a current wealth less than said critical wealth; computing a target asset allocation for a current wealth of said individual based on the determining, the target asset allocation during the critical wealth phase computed using a target asset allocation function comprising a target securities allocation of the current wealth based on at least the critical wealth and the retirement wealth; and outputting said target asset allocation for said individual and at least one of said critical wealth, said retirement wealth, and a plot of at least a portion of said utility function.