We conducted a choice experiment to investigate whether retirement savers follow simple portfolio theory when choosing investments. We modeled experimental survey data on 693 participants using a scale-adjusted version of the latent class choice model. Results show that underlying variability in...

Many college and university 403(b) plans restrict the menu of investment choices to funds offered by TIAA-CREF, the current manager of over half of all 403(b) contributions. Further, in the face of Internal Revenue Code changes that will take effect in 2006 and will make 403(b) plan ERISA...

We investigate risk presentations in retirement savings decisions using a discrete choice experiment where subjects choose between a bank account, a growth account and a 50:50 account. Using nine standard formats for investment risk, we analyze responses to risk per se and to format changes....

Basu and Drew (in the JPM Spring 2009 issue) argue that lifecycle asset allocation strategies are counterproductive to the retirement savings goals of typical individual investors. Because of the portfolio size effect, most portfolio growth will occur in the years just before retirement when...

In choosing a glide path strategy for asset allocation over their working lives, retirement savers face a tradeoff between the higher expected wealth provided by strategies that maintain or increase equity holdings over time, against the greater potential security offered from shifting into more...

A line of recent studies cast doubt on the efficacy of the lifecycle investment strategy, which calls for switching into a more conservative investment portfolio as retirement approaches, as a suitable way to provide for the retirement needs of workers with defined-contribution pensions. After...

Collectively organized pension plans must increasingly demonstrate that the risk preferences of their members are adequately reflected in the plans' asset allocations. However, whether funds should elicit individual members' risk preferences to achieve this goal, or whether they can rely on...

The glide path of typical target date funds is based on the relatively simple assumption of risk. If an explicit term structure of risk is present or risk is time-varying, the conventional glide path may not be adequate to fulfil the purpose of target date funds. We introduce a new approach to...