The Location and Allocation of Assets in Pension and Conventional Savings Accounts

46 Pages Posted: 14 Apr 1999 Last revised: 12 Oct 2010

See all articles by John B. Shoven

John B. Shoven

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 1999


This paper addresses two important parts of the problem of saving for retirement. They are (1) if assets are to be held in both conventional (and hence taxable) accounts and pension accounts, which assets should be held in each? and, (2) if the investor is substantially risk averse, what is the optimal mix of stocks and bonds for retirement saving? It is shown that the conventional wisdom of first placing heavily taxed corporate bonds in the pension account (and holding equity mutual funds outside the account) is the wrong asset location strategy for most people and most circumstances. It is also shown that even very risk averse retirement savers should allocate more than half of their portfolio to stocks if asset returns have the same means, variances, and covariances as have been observed over the past seventy years.

Suggested Citation

Shoven, John B., The Location and Allocation of Assets in Pension and Conventional Savings Accounts (March 1999). NBER Working Paper No. w7007. Available at SSRN:

John B. Shoven (Contact Author)

Stanford University - Department of Economics ( email )

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