Balancing Longevity Risk and Market Risk In Target Date Funds
7 Pages Posted: 6 Oct 2010
Date Written: October 1, 2010
There are two basic types of risk that investors try to balance when saving for retirement: longevity risk and market risk. Using an asset-liability framework, we demonstrate how creating a defined contribution plan that encourages participants to contribute early, contribute increasing amounts, and invest in a target date fund with a conservative glide path helps achieve a balance of these two types of risk.
Keywords: Defined Contribution Plans, Glide Paths, Pension Fund, Target Date Funds
Suggested Citation: Suggested Citation
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By Wade D. Pfau