Final answer:
The Capital Liquidation model requires the least amount of savings for retirement as it plans for the exhaustion of both principals and interest by the end of life expectancy, unlike other models that aim to protect income or retain capital for heirs.
Step-by-step explanation:
Among the given capital needs models, the Capital Liquidation model requires the least amount of savings during remaining work life expectancy. The Capital Liquidation approach assumes that both the principal and the interest of the retirement funds will be exhausted by the end of the individual's life expectancy. Therefore, compared to the Human Life Value, Needs Analysis, and Capital Retention methods, which aim to either protect income or retain capital for heirs, the Capital Liquidation model does not require building up as much savings since the expectation is that the retiree will draw down on the entirety of their savings.
To explain how the amount of savings in an economy is the basis of capital formation, consider that workers save for retirement when their current income exceeds their needs. This saved financial capital is supplied to financial markets, facilitating investment and economic growth. Changes in income and perceived future situations can affect the amount of saving, as can social programs like Social Security, which may shift the supply of financial capital at any interest rate.