RT Journal Article
SR Electronic
T1 Policy Implications for Modeling the Next Generation of Target Date Funds
JF The Journal of Investing
FD Institutional Investor Journals
SP 53
OP 61
DO 10.3905/JOI.2009.18.3.053
VO 18
IS 3
A1 John M Clark
A1 Matthew Hood
YR 2009
UL https://pm-research.com/content/18/3/53.abstract
AB This article outlines some policy parameters for designing a new investment vehicle, with similar features to today’s target date fund that is specifically designed for investors in the withdrawal phase. Since these portfolios appeal to less informed investors, it is recommended that target date funds for the withdrawal phase be designed to provide a set real withdrawal rate. Investors should seek professional advice, either through firm-provided professionals or outside advisors, on the appropriate withdrawal rate class of funds, based on their personal financial situation, legacy goals, and life expectancy. Consistent with the results of Merton [1969] and Samuelson [1969] portfolio managers should maintain a constant allocation to equity to minimize the probability of shortfall risk for these clients.TOPICS: Long-term/retirement investing, legal/regulatory/public policy, portfolio management/multi-asset allocation