Optimal retirement planning with a focus on single and joint life annuities

Agnieszka Karolina Konicz, David Pisinger and Alex Weissensteiner

Quantitative Finance, 2016, vol. 16, issue 2, 275-295

Abstract: We optimize the asset allocation, consumption and bequest decisions of a couple with an uncertain lifetime. The asset menu consists of zero coupon bonds and pure endowments with different maturities, whole life annuities and stocks. The pure endowments pay either fixed or variable benefits, and, similarly to the whole life annuities, are contingent on either a single or a joint lifetime. We model the stock returns and the parameters for the term structure with a vector autoregressive model, thus considering time-varying investment opportunities. To find the optimal solution we use a multi-stage stochastic programming approach, which allows for including complex surrender charges on pure endowments and annuities, as well as transaction costs on stocks and bonds. Our findings indicate that despite high surrender charges, households should invest in a wide combination of life contingent products with different maturities and underlying financial risk.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2015.1114361 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:16:y:2016:i:2:p:275-295

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2015.1114361

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().