On the practical implementation of retirement gains by using an upside and a downside terminal wealth constraint

Catherine Donnelly (), Montserrat Guillen and Jens Perch Nielsenz ()
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Catherine Donnelly: Department of Actuarial Mathematics and Statistics, and the Maxwell Institute for Mathematical Sciences, Heriot-Watt University
Jens Perch Nielsenz: Cass Business School, City University

No 2015-07, Working Papers from Universitat de Barcelona, UB Riskcenter

Abstract: We analyze an investment strategy for an investor with a savings plan for retirement consisting on constraining the terminal wealth accumulated after the savings period by setting an upper and lower bound. We carry out a simulation of the terminal wealth after a savings period of thirty years by using daily, monthly, weekly and yearly updates. We calculate the percentiles of the final wealth and the corresponding lifetime annuity that the pension saver will receive during the consumption period. We observe how that the simulated values converge to the theoretical values of the percentiles when the frequency of update increases. Finally, in the numerical example the effect of inflaction is also considered.

Keywords: retirement; pension; smoothing; saving strategies; investment. (search for similar items in EconPapers)
Pages: 18 pages
Date: 2015-07
New Economics Papers: this item is included in nep-age
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Citations: View citations in EconPapers (2)

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http://www.ub.edu/rfa/research/WP/UBriskcenterWP201507.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bak:wpaper:201507

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