“…Ding et al . () investigate consumption and asset allocation for retirees in a Merton setting with particular attention to the shock‐absorber role of bequests. As in virtually all Merton models, annual outlays are curtailed if wealth falls or if expected remaining lifespan is revised upwards.…”
Section: Towards Economics‐based Financial Plansmentioning
confidence: 90%
“…She shows that the equivalent position in the two underlying assets (i.e., shares and cash) typically turns out to be surprisingly conservative. Her research illustrates why constant‐mix positions overlaid with derivatives are not necessarily superior to positions in underlying assets that change through time (although Ding et al ., do identify a role for long‐term puts). Notably, an investor tends to get a clearer picture of her effective portfolio.…”
Section: Literaturementioning
confidence: 99%
“… In common with Ding et al . (), the expected real return to growth assets is 5 per cent pa, the volatility of returns to growth assets is 20 per cent pa, the real return to safe assets is 2 per cent pa, the bequest utility parameter is $20,400 and the propensity to bequeath is .92. In contrast to Ding et al .…”
Section: Towards Economics‐based Financial Plansmentioning
confidence: 99%
“…In contrast to Ding et al . (), the financial wealth taken into retirement is $1 million; the annual expenditures on ultra‐necessities are $2900, corresponding to what Association of Superannuation Funds of Australia () says is the annual energy expenditure needed by a home‐owning couple for a “comfortable” retirement; the rate of time preference is 3.7 per cent, that being the rate which levels out the expected retirement consumption path (at about $48,000 pa); and the utility curvature parameter is 1.7, that being the value which fixes the initial growth assets share at 45 per cent of the financial wealth taken into retirement.…”
Section: Towards Economics‐based Financial Plansmentioning
The retirement risk zone represents a fragile period in the financial life cycle of people in defined-contributions superannuation. It primarily affects people of middle means. Sequencing risk has been described as an independent risk, but it has largely been a consequence of the dominant asset allocation strategy, described here as aggressive constant-mix. Lifetime glide paths should instead resemble a displaced V: the share of growth assets should fall by something like 20-50 percentage points over working life, then another 5 or 10 percentage points on the day of retirement, but should subsequently rise through retirement, by something like 20-30 percentage points.
“…Ding et al . () investigate consumption and asset allocation for retirees in a Merton setting with particular attention to the shock‐absorber role of bequests. As in virtually all Merton models, annual outlays are curtailed if wealth falls or if expected remaining lifespan is revised upwards.…”
Section: Towards Economics‐based Financial Plansmentioning
confidence: 90%
“…She shows that the equivalent position in the two underlying assets (i.e., shares and cash) typically turns out to be surprisingly conservative. Her research illustrates why constant‐mix positions overlaid with derivatives are not necessarily superior to positions in underlying assets that change through time (although Ding et al ., do identify a role for long‐term puts). Notably, an investor tends to get a clearer picture of her effective portfolio.…”
Section: Literaturementioning
confidence: 99%
“… In common with Ding et al . (), the expected real return to growth assets is 5 per cent pa, the volatility of returns to growth assets is 20 per cent pa, the real return to safe assets is 2 per cent pa, the bequest utility parameter is $20,400 and the propensity to bequeath is .92. In contrast to Ding et al .…”
Section: Towards Economics‐based Financial Plansmentioning
confidence: 99%
“…In contrast to Ding et al . (), the financial wealth taken into retirement is $1 million; the annual expenditures on ultra‐necessities are $2900, corresponding to what Association of Superannuation Funds of Australia () says is the annual energy expenditure needed by a home‐owning couple for a “comfortable” retirement; the rate of time preference is 3.7 per cent, that being the rate which levels out the expected retirement consumption path (at about $48,000 pa); and the utility curvature parameter is 1.7, that being the value which fixes the initial growth assets share at 45 per cent of the financial wealth taken into retirement.…”
Section: Towards Economics‐based Financial Plansmentioning
The retirement risk zone represents a fragile period in the financial life cycle of people in defined-contributions superannuation. It primarily affects people of middle means. Sequencing risk has been described as an independent risk, but it has largely been a consequence of the dominant asset allocation strategy, described here as aggressive constant-mix. Lifetime glide paths should instead resemble a displaced V: the share of growth assets should fall by something like 20-50 percentage points over working life, then another 5 or 10 percentage points on the day of retirement, but should subsequently rise through retirement, by something like 20-30 percentage points.
In 2017 Australian superannuation assets stood at 148 per cent of GDP, or $2.5 trillion in absolute terms. This was the world's fourth largest pool of retirement savings, a remarkable outcome over 25 years of the operation of the Superannuation Guarantee. We survey the local academic, industry and policy literature on the economics of superannuation during the last quarter of a century. Topics include the policy debate, the positive, normative and behavioural economics of household interaction with superannuation, and the structure, conduct and performance of the superannuation industry. We encourage further research into effective tax rates, the need to hedge human capital and the automation of financial advice.
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