Retirement saving with contribution payments and labor income as a benchmark for investments
AbstractIn this paper we study the retirement saving problem from the point of view of a plan sponsor, who makes contribution payments for the future retirement of an employee. The plan sponsor considers the employee's labor income as investment-benchmark in order to ensure the continuation of consumption habits after retirement. We demonstrate that the demand for risky assets increases at low wealth levels due to the contribution payments. We quantify the demand for hedging against changes in wage growth and find that it is relatively small. We show that downside-risk measures increase risk-taking at both low and high levels of wealth.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 27 (2003)
Issue (Month): 6 (April)
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Web page: http://www.elsevier.com/locate/jedc
Other versions of this item:
- Berkelaar, A.B. & Kouwenberg, R.R.P., 2003. "Retirement saving with contribution payments and labor income as a benchmark for investments," Econometric Institute Research Papers EI 9946/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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