This paper examines how households should optimally allocate their portfolio choices between risky stocks and risk-free bonds over their lifetime. Traditional lifecycle models in previous work suggest that the allocation toward stocks should start high (near 100%) early in life and decline over...

This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky stocks and risk-free bonds over its lifecycle. We show that allowing for the wage indexation of social security benefits fundamentally alters the optimal decisions. Moreover, the...

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky stocks and...

This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky stocks and risk-free bonds over its lifecycle. We show that allowing for the wage indexation of social security benefits fundamentally alters the optimal decisions. Moreover, the...