Targeting Retirement Security with a Dynamic Asset Allocation 	   Strategy

Kobor, Adam; Muralidhar, Arun

doi:10.1080/0015198x.2020.1758503

Cited by 5 publications

(2 citation statements)

References 10 publications

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“…Another part of the literature on the optimal investment criteria for DC pension funds focuses on members' optimal control between consumption and investment during the working life. The general goal is to secure a target level of income that maintains the individual's pre-retirement lifestyle (see Kobor and Muralidhar 2020). The seminal papers on that issue (such as Bodie and Crane (1997) and Bodie et al (2004)) are reviewed by Bodie et al in Bodie et al (2010) (where human capital is a highlighted factor).…”

Section: Connection With the Literaturementioning

confidence: 99%

On Valuation and Investments of Pension Plans in Discrete Incomplete Markets

Anthropelos,

Blontzou

2023

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We study the valuation of a pension fund’s obligations in a discrete time and space incomplete market model. The market’s incompleteness stems from the non-replicability of the wage process that finances the pension plan through time. The contingent defined-benefit liability of the pension fund is a function of the wages, which can be seen as the payoff of a path-dependent derivative security. We apply the notion of the super-hedging value and propose its difference from the current pension’s fund capital as a measure of distance to liability hedging. The induced closed-form expressions of the values and the related investment strategies provide insightful comparative statistics. Furthermore, we use a utility-based optimization portfolio to point out that in cases of sufficient capital, the application of a subjective investment criterion may result in heavily different strategies than the super-hedging one. This means that the pension fund will be left with some liability risk, although it could have been fully hedged. Finally, we provide conditions under which the effect of a possible early exit leaves the super-hedging valuation unchanged.

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Section: Connection With the Literaturementioning

confidence: 99%

On Valuation and Investments of Pension Plans in Discrete Incomplete Markets

Anthropelos,

Blontzou

2023

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“…Garlappi and Huang (2006) predict that the preference to hold bonds in a tax-deferred account can change when tax benefits are more uncertain. Most recently, Kobor and Muralidhar (2020) developed and tested a goal-based, lifetime-income approach that has a better chance of success than a traditional glide-path approach using target-date funds.…”

Section: Economic Utility Functionsmentioning

confidence: 99%

Seeking tax alpha in retirement income

DiLellio,

Simon

2023

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We provide a framework to find an optimal decision for tax-efficient retirement income. By developing a model for income and capital gains tax with stock and bond investments in tax- deferred, tax-exempt, and taxable accounts, we identify three categories of retirees based on their income needs and net worth. We propose and evaluate a simple heuristic to determine the optimal retirement income strategy, quantifying a 0.5% annual return benefit. We call this benefit tax alpha and show its robustness to varying model input parameters. We also suggest approaches for large institutions or FinTech firms to improve their existing financial planning tools.

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