The Role of Inflation-Indexed Bond in Optimal Management of Defined Contribution Pension Plan During the Decumulation Phase

Zhang, Xiaoyi; Guo, Junyi

doi:10.3390/risks6020024

Cited by 3 publications

(3 citation statements)

References 32 publications

(27 reference statements)

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“…This shift has been addressed in many papers such as Gallery et al. (2011), Bateman and Piggott (2011), Morgan and Lothian (2017) and Zhang and Guo (2018). According to Australian Accounting Standards Board (AASB) 119, post‐employment benefit plans are classified as either defined contribution plans or defined benefit plans.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The most important recent shift in the retirement sphere has been the global pattern of shifting from defined benefit (DB) pension schemes to defined contribution (DC) pension plans. This shift has been addressed in many papers such as Gallery et al (2011), Bateman and Piggott (2011), Morgan and Lothian (2017) and Zhang and Guo (2018). According to Australian Accounting Standards Board (AASB) 119, post-employment benefit plans are classified as either defined contribution plans or defined benefit plans.…”

Section: Trends In Retirementmentioning

confidence: 99%

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Financial Literacy and Retirement Spending: A University Student Perspective

Richardson¹,

Alpert

Tanner

et al. 2022

Australian Accounting Review

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Financial provision for retirement consists of two phases, accumulation and decumulation. Young people as an age group have generally been ignored in previous research and there has been little research investigating financial literacy levels of young people and attitudinal aspects of their decision making. As such, this paper examines university students’ views on decumulation. We find that student predictions of their costs in retirement are inaccurate, and this is driven by overconfidence and somewhat mitigated by better financial literacy. Furthermore, when planning for retirement income, the Age Pension is expected to be used the least while interestingly personal savings are expected to be used more than superannuation. The biggest drivers of the different levels of usage for the different funding sources are opinions on the effectiveness and understanding of superannuation. These results demonstrate that there is a lack of understanding of the costs of living and the characteristics of the different pillars of the Australian retirement system. Increasing skills and knowledge in financial literacy and of the Australian retirement system is paramount. The implications of our findings are of interest to government, finance professionals and academics from an education and research perspective.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Trends In Retirementmentioning

confidence: 99%

Financial Literacy and Retirement Spending: A University Student Perspective

Richardson¹,

Alpert

Tanner

et al. 2022

Australian Accounting Review

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“…[12] tend to find the optimal investment strategy to minimize the expected loss of the retirees as measured by the performance of the fund against a benchmark by adopting exponential or power loss functions. [30] consider the effects of inflation and maximize the CRRA utility from the terminal real wealth by investing the fund in inflationindexed bonds. In the third stand of research on this topic, some literature assumes that one important reason to defer annuitization is the desire to buy a better annuity at the time of compulsory annuitization and then resorts to the target-based model.…”

mentioning

confidence: 99%

Multi-period optimal investment choice post-retirement with inter-temporal restrictions in a defined contribution pension plan

Wu¹,

Wang²,

Liu³

et al. 2020

Journal of Industrial &Amp; Management Optimization

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This paper studies a multi-period portfolio selection problem during the post-retirement phase of a defined contribution pension plan. The retiree is allowed to defer the purchase of the annuity until the time of compulsory annuitization. A series of investment targets over time are set, and restrictions on the inter-temporal expected values of the portfolio are considered. We aim to minimize the accumulated variances from the time of retirement to the time of compulsory annuitization. Using the Lagrange multiplier technique and dynamic programming, we study in detail the existence of the optimal strategy and derive its closed-form expression. For comparison purposes, the explicit solution of the classical target-based model is also provided. The properties of the optimal investment strategy, the probabilities of achieving a worse or better pension at the time of compulsory annuitization and the bankruptcy probability are compared in detail under two models. The comparison shows that our model can greatly decrease the probability of achieving a worse pension at the compulsory time and can significantly increase the probability of achieving a better pension.

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