Research On Investment,Consumption And Insurance Strategies And Some Related Issues Under Tax-deferral Policy

In recent years,the aging of population in China is becoming more and more serious,which makes the burden of providing for the aged of our society and family more and more serious.In addition,due to the unbalanced development of China’s threepillar pension system,the " excessive" payment of the basic pension of the first pillar has brought great pressure on government finances.In order to alleviate this trend and the problem of "getting old before getting rich",and to further implement the report of the 19th National Congress of the Communist Party of China（CPC）:"To make steady progress in ensuring people’s access to elderly care",the state has implemented policies related to tax-deferred commercial pension to help the development of the third pillar pension.With China’s economic construction modernization,people’s insurance concepts and consciousness are also improved accordingly.More and more individuals or families buy tax-deferred pension to provide a guarantee for their retirement life and purchase life insurance to shift the risk of death and loss.Based on the above background,this paper will study the individual optimal choice of investment,consumption,and tax-deferred pension.Underthe objective of maximizing the expected utility of personal consumption and the terminal wealth at retirement time,this paper analyzes the form of optimal strategies based on the general risk aversion utility function and obtains explicit expressions of optimal strategies and value function under exponential utility and power utility function.Besides,considering the death risk before retirement,this paper further introduces the decision of life insurance and studies the optimal strategies for individuals,including investment,consumption,the purchase of tax-deferred commercial pension and life insurance.In order to study the influence of tax rate,life insurance,income and some other parameters on the strategies and value function,this paper finishes the sensitivity analysis of the optimal strategies and the value function respectively,also give the sensitivity analysis of the strategies with the life insurance under exponential utility.Through the analysis of the results and combined with the actual situation,this paper puts forward some targeted and reasonable suggestions to help individuals better manage income and allocate wealth,so as to achieve their own optimal value goal.The main contribution of this paper is that the model takes into account the first pillar and the third pillar pension accounts,applies geometric Brownian motion to describe tax-deferred commercial pension accounts and considers the proportion limit of tax-deferred commercial pension.All these make the model of this paper more practical and fit the policies.Moreover,the addition of life insurance decision makes the model more comprehensive.Through numerical simulation,the following main conclusions can be drawn.First,with the increase of individual income tax rate,individuals should reduce consumption and purchase of life insurance;When the tax rate of tax-deferred commercial pension increases,individuals should increase the proportion of stock investment and purchase of life insurance but reduce consumption.Secondly,when the Sharpe ratio of tax-deferred commercial pension is not lower than that of stock,individuals should purchase tax-deferred pension at 6%,which is the upper proportional limit of the purchase;Finally,compared with low-income groups,high-income groups have a higher individual income tax rate,hence they are more suitable for purchasing tax-deferred commercial pension.