What DC Plan Members Really Want
12 Pages Posted: 1 Oct 2011 Last revised: 17 Sep 2012
Date Written: September 21, 2011
Target-date or lifecycle funds are popular because they simplify decision making, but they are blunt instruments in dealing with market risk and personal goals. We reengineer age-based lifecycle funds, making them more responsive to individual goals and to market conditions, by structuring a dynamic risk-based glide path that targets replacement income. We conclude that adjusting portfolio risk based on progress toward a goal improves the likelihood of achieving a target income with lower expected risk than current lifecycle funds and other popular strategies.
Keywords: Defined Contribution Plan, Dynamic Glide Path, Lifecycle Fund, Pension Fund, Target-Date Fund
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