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Less is more: increasing retirement gains by using an upside terminal wealth constraint
Donnelly, Catherine; Gerrard, Russell; Guillén, Montserrat; Perch Nielsen, Jens
We solve a portfolio selection problem of an investor with a deterministic savings plan who aims to have a target wealth value at retirement. The investor is an expected power utility-maximizer. The target wealth value is the maximum wealth that the investor can have at retirement. By constraining the investor to have no more than the target wealth at retirement, we find that the lower quartiles of the terminal wealth distribution increase, so the risk of poor financial outcomes is reduced. The drawback of the optimal strategy is that the possibility of gains above the target wealth are eliminated.
Estalvi
Jubilació
Plans de pensions
Anàlisi financera
Saving
Retirement
Pension trusts
Investment analysis
cc-by-nc-nd, (c) Donnelly et al., 2015
http://creativecommons.org/licenses/by-nc-nd/3.0/es/
Working Paper
Universitat de Barcelona. Riskcenter
         

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