Paper presented at the 18th Superannuation Colloquium, UNSW, 12-13 July 2010.
This paper provides an overview of RIMHYPO-B, a model developed in Treasury as part of the Participation Modelling Project. RIMHYPO-B is a behavioural add-on to the established Treasury RIMHYPO model. This note describes how RIMHYPO-B calculates optimal retirement outcomes (including part-time pathways) based on lifetime utility measured in terms of consumption, leisure, preferences, discount rates and conditional survival probabilities. While RIMHYPO-B runs with 'hypothetical' households, a large number of simulations are run for each household in order to attribute a range of stochastic characteristics. This approach provides a more representative population cohort and therefore a more realistic distribution of retirement outcomes. While many models require significant simplification and linearisation of the tax and transfer environment, an advantage of RIMHYPO-B is that detailed policy changes in the area of superannuation, taxation and income support can be modelled.