Allocating Assets in Retirement Savings to Avoid Downside Risk

Abstract

An investor saving for retirement attempts to allocate as sets in a manner that provides enough savings to produce a secure post retirement income. Falling short of the desired saving level has a large negative impact on retirement income and is a major concern for the investor. We empirically investigate the allocation of assets between equities and less risky bonds constrained by a desire to minimize the size and occurrence of a short fall. Contrary to much of the theoretical finance literature, we find that the investor should decrease the portion of saving in equities as the retirement date approaches.

Citation

Lien, D. and Root, T. (2005), "Allocating Assets in Retirement Savings to Avoid Downside Risk", Managerial Finance, Vol. 31 No. 8, pp. 18-32. https://doi.org/10.1108/03074350510769785