Here are a few key complications of Modigliani's life-cycle theory:
1. Uncertainty. The theory assumes people can perfectly predict their future income, retirement age, lifespan, etc. In reality, there is much uncertainty that makes precise life-cycle planning difficult. Things like health issues, job losses, stock market crashes introduce risk.
2. Bequest motives. The theory assumes people only save for their own retirement and do not leave intentional bequests to heirs. In practice, inheritances and bequests complicate saving decisions.
3. Liquidity constraints. The theory assumes people can borrow and save freely at all ages. But limited access to credit markets means some are liquidity constrained