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Ding, Jie

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  • Paper Title: Annuitization with Phased Consumption Requirements: Who, When and How Much
  • Department Affiliation: Economics
  • Supervisors’ Names:
    • Professor Geoff Kingston
    • Doctor Sachi purcal 


Find the strategy which minimizes initial wealth required allowing a given lifetime ruin probability.


The required consumption is assumed to be different for different ages and forms a U shape, reflecting the notion of different consumption requirement of different phases in retirement.  

Key literature / theoretical perspective:

Milevky, Moore and Young (2005) “Asset Allocation and Annuity-Purchase Strategies to Minimize the Probability of Financial Ruin”


I used a historical scenario approach to model stock return, instead of assuming a normal distribution.


Given current annuity prices in Australia, there is very little incentive for retirees to annuitize; by incorporating life annuities into a financial strategy, a retiree is only able to reduce the wealth required at retirement by about 4%. There is however huge potential for improvement, as when annuity prices provide fair value, the same retiree can reduce her required saving by about 30%. 

Research limitations/implications:

This paper also do not consider bequest motive and only assumes known future consumption, and does not take into account publicly provided age pensions. 

Practical and Social implications:  

There is a significant benefit of annuitization to retirees and government, however future research is required for an effective ways to make effective use of it.  


Annuities, retirement, ruin