Glide paths for a retirement plan with deferred annuities. (31st August 2021)

• Record Type: Journal Article
• Authors: Jang, Chul; Clare, Andrew; Owadally, Iqbal
• Is Part Of: Journal of pension economics & finance. Volume 21:Number 4(2022)
• Page Start: 565
• Page End: 581
• Publication Date: 2021-08-31
• Subjects: Deferred annuity -- glide-path strategy -- multi-stage stochastic programming -- retirement planning; C61 -- G11 -- G52 -- J32; Pensions -- Finance -- Periodicals; Social security -- Finance -- Periodicals; 331.25205
• DOI: 10.1017/S1474747221000251
• Languages: English
• ISSNs: 1474-7472

Abstract

Abstract: We construct investment glide paths for a retirement plan using both traditional asset classes and deferred annuities (DAs). The glide paths are approximated by averaging the asset proportions of stochastic optimal investment solutions. The objective function consists of power utility in terms of secured retirement income from purchased DAs, as well as a bequest that can be withdrawn before retirement. Compared with conventional glide paths and investment strategies, our DA-enhanced glide paths provide the investor with higher welfare gains, more efficient investment portfolios and more responsive retirement income patterns and bequest levels to different fee structures and personal preferences.