A two factor stochastic model is introduced for the two phases of a defined-contribution pension scheme. During the accumulation phase of the pension, the scheme member invests part of their stochastic income in a portfolio of a risky stock and a bond in order to build up sufficient funds for...

Among the elderly, Social Security income is distributed very differently than private pension and asset income. For the bottom quintile of the income distribution, 81 percent of income comes from Social Security, while only 6 percent is from pensions plus income from assets. For the top...

We analyze the rationale for the pay-as-you-go (paygo) pension system existence on diversi fication grounds. A continuous-time portfolio choice setting is built, basing on Merton (1971)´s analysis, where a reasonable balance between the taking account of the economic and fi nancial facets of...

Though millions of US workers have 401(k) plans, few studies evaluate participant investment performance. Using data on over 1,000 401(k) plans and their participants, we identify key portfolio investment inefficiencies and attribute them to offered investment menus versus individual portfolio...

A simulation approach is used to investigate how various investment strategies affect the ability of retirees to spend at a desired level up until death. Retirees are assumed to maintain all investment and longevity risk, and also have access to a government-sponsored and means tested Age...

The present paper analyzes optimal supervisory rules for pension funds taking account of diverse pension security mechanisms: support provided by either a pension guarantee fund, a plan sponsor or by both. Assuming that the regulatory rule is either to control the shortfall probability or...

A new approach succeeds at integrating optimal asset allocation with economic pension liabilities. As a practical matter, pension plan sponsors must relate an understanding of their pension liabilities and the prospective risk/return characteristics of capital market instruments to the specific...

As a practical matter, pension plan sponsors must relate an understanding of their pension liabilities and the prospective risk/return characteristics of capital market instruments to the specific problem of determining an optimal asset mix. Although a number of approaches have been proposed to...