Anyone who is concerned with retirement (and who isn't?) would benefit from reading this book. Even the most math phobic among us should not be intimidated by the title. A tenured finance professor at the Schulich School of Business at York University in Toronto, Milevsky takes us on a tour through the history of mathematical finance (which includes actuarial science) and paints us vivid portraits of seven luminaries whose contributions reverberate to this day.
Beginning with a simple present value calculation attributed to Europe's first great medieval mathematician, Fibonacci, Milevsky shows us how mathematics provides the answers to the essential questions of retirement such as, "How long will my nest egg last?" and "Should I take a lump sum or an annuity payout?" After reading this book, there is simply no excuse for relying on gut feelings or intuition when making important financial decisions whose impact will be felt for the remainder of life. Milevsky's final equation, which is attributed to the Russian mathematician Andrei N. Kolmogorov, tells you the probability of running out of money in retirement, taking both mortality and the spending rate into account. It is an excellent alternative to doing a full-fledged Monte Carlo analysis such as the one found at IFA's Retirement Analyzer.
Those who would like to see the equations in action and experiment with different inputs can download a complimentary Excel spreadsheet from Dr. Milevsky's consulting company. Lastly, I have to acknowledge the extraordinarily clever poem at the very end written by Milevsky's 11-year-old daughter, Maya. I have no doubt that we will be hearing more from her in the future. I'm just not sure if she will make her mark in the arts or the sciences, or both?