A substantial literature has developed models of optimal consumption and asset allocation based on the assumption that stocks and bonds have fixed returns, with normal independent, identically distributed disturbances. Households optimally rebalance from stocks to bonds as they age, reflecting...

Despite the recovery of the stock market since the financial crisis, many retirees have seen significant reductions in their wealth relative to pre crisis expectations and substantial declines in investment income due to very low short-term interest rates. What really matters, though, is the...

The financial crisis has dramatically demonstrated how a collapse in equity prices can decimate retirement accounts. The crisis highlights the fragility of existing 401(k) plans as the only supplement to Social Security and has sparked proposals to reform the retirement income system. One...