Making Investment Choices as Simple as Possible: An Analysis of Target Date Retirement Funds

Bodie, Zvi; Treussard, Jonathan

doi:10.2139/ssrn.900005

Cited by 13 publications

(7 citation statements)

References 13 publications

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“…In such a case it is anticipated that [3]. For the case L (0) \ L (1) , Table 3 below shows examples of the combination (w t , h t ) satisfying the conditions set out in the previous sections with several combinations of (T -t, p 1 , p 2 ).…”

Section: 3mentioning

confidence: 96%

Economic values of contribution cashflows for a sponsoring employer of a DB pension plan and measures to bring the economic costs under control within an affordable range

Shimizu¹

2011

Eur. Actuar. J.

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In many countries defined-benefit pension plans experienced sudden and significant funding gaps caused by the asset price depreciation and the interest rate decline originated from the global financial crisis erupted in August 2007. This paper explores several measures to bring under control the economic costs of contributions from the aspects of benefit designs, funding standards, and investment strategies. On funding standards, this paper proposes payout-year differentiation of funding standards, under which assets and contributions are divided by payout year and loaded, respectively, on 'sequentially chained containers.' This payout-year specific (PYS) funding standard then specifies a sequence of minimum admissible funded ratios (MAFRs) each of which is assigned to the corresponding container. Each MAFR will be a function of the period from the measurement date to the payout year. The MAFRs will be derived assuming a hypothetical investment strategy of switching the speculative portfolio to a complete liability-hedging portfolio immediately when the amount of assets surpasses the value of corresponding liabilities. This PYS funding standard allows taking into account the expected excess returns on risky assets to some extent in the discount rates and thus enables us to reduce the volatility of contributions.

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Section: 3mentioning

confidence: 96%

Economic values of contribution cashflows for a sponsoring employer of a DB pension plan and measures to bring the economic costs under control within an affordable range

Shimizu¹

2011

Eur. Actuar. J.

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“…The Certified Financial Planner Board of Standards, Inc. (CFP Board) established in 1985 sets and enforces the requirements for the CFP® certification in the United States 3 . At the time of writing, the CFP Board oversees more than 70 000 professionals 4 . CFP Board (2013) describes modern portfolio theory as part of the "foundation for any evidence-based approach to assembling a client portfolio" and asserts that "it is only since the 1952 publication of 'Portfolio selection' by Harry Markowitz that the correct way to measure the risk and return of a particular portfolio allocation was established".…”

Section: Simple Rules or Optimisation With No Link To Objectives Or Lmentioning

confidence: 99%

“…By considering a 2006 sample of US target-date funds, Bodie and Treussard (2007) show that these approaches can reasonably be represented by, and modelled as, a starting allocation of 80% to equities linearly decreasing to a 40% allocation after 40 years. This appears reasonable when compared to the average equity allocation glide paths reported in more recent surveys 8 .…”

Section: Target-date Portfoliosmentioning

confidence: 99%

Life Cycle Goal Achievement or Portfolio Volatility Reduction?

Dempster

Kloppers²,

Osmolovskiy³

et al. 2015

SSRN Journal

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“…Equally, auto-enrolment of those discouraged and disaffected may be judged coercive, especially if the process of opt-out is cumbersome, diffi cult to activate and demanding in terms of the required cognitive and emotional skills. 54 In any event, the co-existence of a diversity of participants ' expectations and (implied) motives, if systematically replicated in UK DC and self-directed plans, suggests that plan sponsors have a signifi cant obligation to consult with participants as to their needs and expectations. We would argue, as well, that UK DC plan sponsors might have to take seriously the design and governance of their plans in relation to participants ' expectations -perhaps more so than is currently the case.…”

Section: Diversity Paternalism and Policymentioning

confidence: 99%

The ‘new’ paternalism, consultation and consent: Expectations of UK participants in defined contribution and self-directed retirement savings schemes

Clark¹,

Knox‐Hayes²

2009

Pensions Int J

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Concern about the competence of individual decision-makers has prompted governments and pension plan sponsors to take advantage of the insights gleaned from the behavioural revolution. Auto-enrolment, target-date and related investment strategies may effectively counter behavioural biases such as inertia and the lack of attention paid to fi nancial planning. Nonetheless, some participants may expect consultation when plan sponsors and management implement ' default ' strategies and the like. Here, we assess the expectations of plan participants drawn from a national representative sample of UK residents who participate in defi ned contribution and personal pension schemes. It is found that respondents who expressed an interest in a high degree of consultation for the pathway to retirement were older, have higher incomes and recognised the signifi cance of retirement saving schemes for their long-term welfare. A signifi cant number of respondents would not or could not offer an opinion on the desirability of consultation. These respondents can be characterised as discouraged or disenchanted or disaffected, and socioeconomic variables were not good predictors of these respondents ' opinions of and attitudes towards consultation. Our results support, in part, the ' new ' paternalism but raise questions about the blanket application of related measures to heterogeneous groups of plan participants.

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Making Investment Choices as Simple as Possible: An Analysis of Target Date Retirement Funds

Cited by 13 publications

References 13 publications

Economic values of contribution cashflows for a sponsoring employer of a DB pension plan and measures to bring the economic costs under control within an affordable range

Economic values of contribution cashflows for a sponsoring employer of a DB pension plan and measures to bring the economic costs under control within an affordable range

Life Cycle Goal Achievement or Portfolio Volatility Reduction?

The ‘new’ paternalism, consultation and consent: Expectations of UK participants in defined contribution and self-directed retirement savings schemes

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