The Location and Allocation of Assets in Pension and Conventional Savings Accounts
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.
|Date of creation:||Mar 1999|
|Date of revision:|
|Publication status:||published as Shoven, John B. and Clemens Sialm. "Asset Location In Tax-Deferred And Conventional Savings Accounts," Journal of Public Economics, 2004, v88(1-2,Jan), 23-38.|
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- N. Gregory Mankiw & James M. Poterba, 1996.
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NBER Working Papers
5607, National Bureau of Economic Research, Inc.
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- John B. Shoven & David A. Wise, 1998.
"The Taxation of Pensions: A Shelter Can Become a Trap,"
in: Frontiers in the Economics of Aging, pages 173-212
National Bureau of Economic Research, Inc.
- John B. Shoven & David A. Wise, 1996. "The Taxation of Pensions: A Shelter can Become a Trap," NBER Working Papers 5815, National Bureau of Economic Research, Inc.
- Thomas E. MaCurdy & John B. Shoven, 1992. "Stocks, Bonds, and Pension Wealth," NBER Chapters, in: Topics in the Economics of Aging, pages 61-78 National Bureau of Economic Research, Inc.
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