Less is more: Increasing retirement gains by using an upside terminal wealth constraint |
| |
Institution: | 1. DTU Management Engineering, Management Science, Technical University of Denmark, Produktionstorvet 426, Kgs. Lyngby 2800, Denmark;2. Department of Operations Research and Financial Engineering, Bendheim Center for Finance, Princeton University, Princeton, NJ 08544, United States |
| |
Abstract: | 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 quantiles 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 is eliminated. |
| |
Keywords: | Retirement planning Retirement wealth distribution Savings plan Portfolio optimization Stochastic control |
本文献已被 ScienceDirect 等数据库收录! |
|