An assessment of life-cycle funds

An assessment of life-cycle funds

An

assessment of life-cycle funds

Soto

Mauricio

Soto, Mauricio

Author

Author

Triest

Robert K.

Triest, Robert K.

Author

Author

Golub-Sass

Alex

Golub-Sass, Alex

Author

Author

Golub-Sass

Francesca

Golub-Sass, Francesca

Author

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20082008monographic

Chestnut Hill, Mass.

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2008

2008

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

Life-cycle funds offer an intuitive approach to retirement investing. Despite their intuitive appeal, the empirical and theoretical support for life-cycle funds is mixed. We examine life-cycle funds using dynamic optimization techniques to evaluate the optimal asset allocation over the life cycle. In our modeling we introduce a utility function that accounts for the individuals taste for bearing risk and analyze the role of human capital on allocation decisions. The simulations generally support the use of target retirement date funds once human capital is taken into account. Investment fees, however, could potentially erode any increased asset levels that life-cycle funds create. Ultimately, an appropriate asset allocation depends on individuals objectives and the opportunities available in financial markets.

Mauricio Soto, Robert K. Triest, Alex Golub-Sass, and Francesca Golub-Sass.

CRR WP2008-10

CRR WP2008-10

CRR WP

2008-10

http://crr.bc.edu/images/stories/Working_Papers/wp_2008-10.pdf

MChBEnglisheng

MChB

Englisheng

English

eng