Abstract for: A system dynamics model of the individual decisions of a salaried employee in saving for retirement
This paper analyses the dynamic behaviour of an individual in salaried employment saving for retirement. Employees decide what proportion of their salary they will allocate to saving for retirement, and trie to ensure that their realised retirement income meets their retirement income expectations. The dynamic behaviour stems from changes that the employees make in their allocation in response to changing income levels and investment returns. The analysis illustrates that an early start to the process of saving for retirement is important. Employees should evaluate the projected retirement income periodically and should, when required, make strong and swift adjustments in order to ensure that they will obtain a reasonable retirement income. If not, they may be faced with having to take an unpleasant drop in living standards during retirement.