We study optimal portfolios for defined contribution (possibly mandatory) pension systems, which maximize expected pensions subject to a risk level. By explicitly considering the present value of future individual contributions and changing the risk-return numeraire to future pension units we...

Little is known about the degree to which individuals are uncertain about their future Social Security benefits, how this varies within the U.S. population, and whether this uncertainty influences financial decisions related to retirement planning. To illuminate these issues, the authors present...

Two issues may have a tremendous impact on the adequacy of retirement income for today's workers: The growth of 401(k) pension plans and the possible privatization of Social Security. Workers are becoming increasingly responsible for the adequacy of their retirement income by determining how...

The purpose of this study is twofold. On one hand we derive an optimal allocation framework between stocks and bonds, with and without a momentum factor, taking into account a regime-switching model based on monthly equity and interest rate data since 1870. On the other, we investigate the...

Individual retirement accounts (IRAs) hold more than 25 percent of all retirement assets in the United States. A substantial portion of these assets originated in other tax-qualified retirement plans, such as defined benefit (pension) and 401(k) plans, and were moved to IRAs through rollovers....

We consider the portfolio selection problem in the accumulation phase of a defined contribution (DC) pension scheme. We solve the mean-variance portfolio selection problem using the embedding technique pioneered by Zhou and Li (2000) and show that it is equivalent to a target-based optimization...

Current demographic dynamics driven by low fertility and increasing longevity requires adjustments of the traditional frameworks of providing pensions. In this article we highlight three crucial issues policymakers should address by implementing those adjustments. First, fiscal limitations given...

Defined-benefit (DB) pension funds, which are often underfunded, rely on the legal obligation of their sponsor to secure pension rights. This paper is the first to solve the optimal portfolio choice problem of pension funds taking into account the risk on the sponsor's guarantee, and we show...

Expectations for investment returns play an important role in establishing business capital cost and capital structure, as well as influencing individual savings behaviour, risk-taking, and long-term funding of institutional obligations such as pensions. Proper and realistic forecasting makes...

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...