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Investment strategies in retirement: in the presence of a means-tested government pension*

Published online by Cambridge University Press:  21 June 2011

ADAM BUTT  and
ZIYONG DENG
ADAM BUTT
Affiliation:
Australian National University (e-mail: [email protected])
ZIYONG DENG
Affiliation:
Macquarie University
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Abstract

A simulation approach is used to investigate how various investment strategies affect the ability of retirees to spend at a desired level up until death. Retirees are assumed to maintain all investment and longevity risk, and also have access to a government-sponsored and means-tested Age Pension to provide part of their desired expenditure. It is found that a 100% allocation to growth assets is optimal for large expenditure desires relative to initial balance levels, with allocations outside of this being sensitive to movements in initial balance and desired expenditure level, as well as interactions with the Age Pension.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 11 , Issue 2 , April 2012 , pp. 151 - 181
Copyright
Copyright © Cambridge University Press 2011

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