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Life-Cycle Portfolios as Government Policy

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  • Shiller Robert J.

    (Yale University)

Abstract

A life-cycle portfolio for personal accounts within Social Security, such as President George Bush has proposed, would adjust risk exposure as a function of the worker's age. This would involve the government in making complex dynamic portfolio decisions for individuals. The conventional rule of thumb that workers should invest a percentage of their portfolio equal to roughly 100 minus their age in stocks appears to be far from optimal. Choosing the optimal portfolio requires considering issues of behavioral economics such as why people do not already invest optimally and what kinds of people will sign up for the life-cycle portfolio.

Suggested Citation

  • Shiller Robert J., 2005. "Life-Cycle Portfolios as Government Policy," The Economists' Voice, De Gruyter, vol. 2(1), pages 1-9, August.
    • Handle: RePEc:bpj:evoice:v:2:y:2005:i:1:n:14
    DOI: 10.2202/1553-3832.1095
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    Cited by:

    1. Andrew Clare & James Seaton & Peter N. Smith & Stephen Thomas, 2019. "The Rehabilitation of Glidepath Investing," Discussion Papers 19/17, Department of Economics, University of York.
    2. Iqbal Owadally & Steven Haberman & Denise Gómez Hernández, 2013. "A Savings Plan With Targeted Contributions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(4), pages 975-1000, December.
    3. Pfau, Wade Donald, 2011. "Getting on Track for a Sustainable Retirement: A Reality Check on Savings and Work," MPRA Paper 31900, University Library of Munich, Germany.
    4. Andreas Lichtenstern & Pavel V. Shevchenko & Rudi Zagst, 2019. "Optimal life-cycle consumption and investment decisions under age-dependent risk preferences," Papers 1908.09976, arXiv.org.
    5. Basu, Anup K. & Chen, En Te & Clements, Adam, 2014. "Are lifecycle funds appropriate as default options in participant-directed retirement plans?," Economics Letters, Elsevier, vol. 124(1), pages 51-54.
    6. Shiller, Robert J., 2006. "Life-cycle personal accounts proposal for Social Security: An evaluation of President Bush's proposal," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 427-444, May.
    7. Steven James Lee, 2021. "Does Fixed Income Buffer against Fraud Shocks?," JRFM, MDPI, vol. 14(10), pages 1-22, October.

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