Optimal strategies for the decumulation of retirement savings under differing appetites for liquidity and investment risks
Abstract: A retiree’s appetite for risk is a common input into the lifetime utility models that are traditionally used to find optimal strategies for the decumulation of retirement savings. In this joint work with Professor Benjamin Avanzi, we consider a retiree with potentially differing appetites for the key risks of decumulation, allowing us to map optimal strategies in two dimensions of risk. Through an illustrative example calibrated to the Australian context, we find results that are consistent with the shallow annuity market observed in this jurisdiction. This consistency lends support to our framework and may provide some new insight into the so-called annuity puzzle.
Seminar organized by Prof. S. Arnold
Link to Paper
Avanzi, B., De Felice, L. Optimal strategies for the decumulation of retirement savings under differing appetites for liquidity and investment risks. Decisions Econ Finan (2024). https://doi.org/10.1007/s10203-024-00448-y