Optimal Target-Date Funds for Observed Savings Rates

2021 ◽  
Author(s):  
Radu Gabudean ◽  
Francisco Gomes ◽  
Alexander Michaelides ◽  
Yuxin Zhang
Keyword(s):  
Target Date ◽  
Target Date Funds ◽  
Optimal Target ◽  
Savings Rates

DYNAMIC ASSET ALLOCATION FOR TARGET DATE FUNDS UNDER THE BENCHMARK APPROACH

2021 ◽  
pp. 1-26
Author(s):  
Jin Sun ◽  
Dan Zhu ◽  
Eckhard Platen
Keyword(s):  
Asset Allocation ◽  
Dynamic Asset Allocation ◽  
Growth Optimal Portfolio ◽  
Risky Assets ◽  
Target Date ◽  
Target Date Funds ◽  
Asset Allocations ◽  
Investment Choices ◽  
Glide Paths

ABSTRACT Target date funds (TDFs) are becoming increasingly popular investment choices among investors with long-term prospects. Examples include members of superannuation funds seeking to save for retirement at a given age. TDFs provide efficient risk exposures to a diversified range of asset classes that dynamically match the risk profile of the investment payoff as the investors age. This is often achieved by making increasingly conservative asset allocations over time as the retirement date approaches. Such dynamically evolving allocation strategies for TDFs are often referred to as glide paths. We propose a systematic approach to the design of optimal TDF glide paths implied by retirement dates and risk preferences and construct the corresponding dynamic asset allocation strategy that delivers the optimal payoffs at minimal costs. The TDF strategies we propose are dynamic portfolios consisting of units of the growth-optimal portfolio (GP) and the risk-free asset. Here, the GP is often approximated by a well-diversified index of multiple risky assets. We backtest the TDF strategies with the historical returns of the S&P500 total return index serving as the GP approximation.

On Optimal Allocations of Target-Date Funds

2021 ◽  
pp. jor.2021.1.094
Author(s):  
Radu Gabudean ◽  
Francisco Gomes ◽  
Alexander Michaelides ◽  
Yuxin Zhang
Keyword(s):  
Target Date ◽  
Optimal Allocations ◽  
Target Date Funds

Target Date Funds: Characteristics and Performance

2015 ◽  
Author(s):  
Edwin J. Elton ◽  
Martin J. Gruber ◽  
Andre de Souza ◽  
Christopher R. Blake
Keyword(s):  
Target Date ◽  
Target Date Funds ◽  
And Performance

The Evolution of Private Sector Retirement Income From Defined-Benefit Pensions to Target-Date 401(k) Plans

2019 ◽  
Vol 51 (2) ◽  
pp. 77-85
Author(s):  
John G. Kilgour
Keyword(s):  
Private Sector ◽  
Pension Reform ◽  
Pension Plans ◽  
Retirement Income ◽  
Defined Benefit ◽  
Investment Control ◽  
Target Date ◽  
Target Date Funds ◽  
Market Plan ◽  
Defined Benefit Pensions

Traditional employer-sponsored defined-benefit pension plans in the private sector that provided lifetime benefits have declined precipitously since 1985. They have been largely replaced by Section 401(k) plans in which investment control, market risk and longevity risk have been transferred from the employer to the participant. Most participants opted for the low-yielding money market plan default option, which proved inadequate for providing viable retirement income. The Pension Reform Act of 2006 made two important changes to 401(k) plans: (1) allowed automatic enrollment and (2) allowed target-date funds as a “qualified default investment alternative.” This article examines the evolution from defined-benefit pensions to target-date funds and the closely related collective investment trusts.

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