Post-retirement financial planning with discrete dynamic programming

a practical approach

Jie Ding

Research output: Contribution to journalMeeting abstract

Abstract

Purpose: To find the optimal consumption and investment strategy for Australian retirees subject to the availability of age pension. Originality: I have taken age pension into account of dynamic programming process. I assumed stock return to follow its historical distribution instead of Normal distribution. And I used a special form of utility function which allow the retire to balance expected consumption and probability of ruin. Key Literature / Theoretical Perspective: Analyst the effect of age pension on the optimal consumption and investment behaviour of Australian retirees. Methodology: Numerical Dynamic Programming Method Findings: Normal distribution is not a bad approximation to historical return. Dynamic Programming gives optimal consumption strategy but not optimal investment strategies. Research Limitations/Implications: I have not taken into account housing, health, annuities and realistic retirement spending needs. Practical and Social Implications: Age pension accounts for 80% of Australian retiree’s income, taken this into account is very important in financial planning and a big step towards making dynamic programming method practical in Australia.
Original languageEnglish
Pages (from-to)26-27
Number of pages2
JournalExpo 2010 Higher Degree Research : book of abstracts
Publication statusPublished - 2010
EventHigher Degree Research Expo (6th : 2010) - Sydney
Duration: 19 Nov 201019 Nov 2010

Keywords

  • retirement
  • superannuation
  • financial planning
  • dynamic programming

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