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Abstract
The retirement goals of many Americans are underfunded. The problem is compounded by the complexity of self-managing distribution portfolios, particularly as DC plans replace DB plans. We believe most retirement glide paths are satisfactory but suboptimal solutions. We introduce a glide path of financial assets over the life cycle based on a retirement goal and depleting human capital. The method is anchored to the foundational principles of intertemporal portfolio theory while borrowing heavily from goals-based asset allocation. The result is a dynamic asset allocation over the life cycle that is a function of critical input variables relevant to retirement planning such as retirement savings, retirement consumption and risk aversion. The glide path can be customized to individuals, or semi-customized to discrete subpopulations of DC plan participants.
TOPICS: Retirement, wealth management
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Don’t have access? Click here to request a demo
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US and Overseas: +1 646-931-9045
UK: 0207 139 1600