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Abstract
This article introduces a new model to jointly determine the optimal allocation to equities, real assets, and annuities for a retiree with a given set of preferences. This model improves on a number of existing retirement income models by directly incorporating a cost associated with deviating from the investor’s target risk preference, jointly testing the effects of four preference variables—aversion to volatility, strength of a bequest motive, preference for sustainable expenditure, and sensitivity to the risk of future inflation—using a dynamic withdrawal strategy and taking a probabilistic approach to mortality.
TOPICS: Retirement, risk management, portfolio construction
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US and Overseas: +1 646-931-9045
UK: 0207 139 1600