This paper adds to finance pedagogy related to the wealth accumulation stage of retirement planning using techniques that rely heavily on understanding the time value of money (TVM) concepts.
We provide a step-by-step explanation of a retirement wealth accumulation model, accompanied by a detailed numerical example ready for use in the classroom.
We present a systematic approach to estimate the retirement nest egg and the target return required to achieve the nest egg. The estimated target return is suggested as a primary determinant of an investor’s asset allocation for retirement wealth accumulation. Our approach directly links the estimated nest egg with a target return estimation and asset allocation decisions.
This paper contributes to retirement planning pedagogy by employing a unique model that applies TVM concepts relevant to the wealth accumulation stage.
