Chapter

The Effect of Uncertain Labor Income and Social Security on Life‐Cycle Portfolios

Raimond Maurer, Olivia S. Mitchell and Ralph Rogalla

in Reorienting Retirement Risk Management

Published in print August 2010 | ISBN: 9780199592609
Published online September 2010 | e-ISBN: 9780191594618 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199592609.003.0006
The Effect of Uncertain Labor Income and Social Security on Life‐Cycle Portfolios

Show Summary Details

Preview

This paper examines how labor income volatility and social security benefits influence life‐cycle household portfolios. Specifically, it examines the quantity and location of household saving, taking into account liquid financial wealth and annuities, and stocks versus bonds. Higher labor income uncertainty and lower old‐age benefits boost demand for stable income in retirement, but also when young. In addition, a declining equity glide path with age is appropriate for the worker with low income uncertainty but for the high‐income risk worker, equity exposure rises until retirement. We also evaluate how changes in social security benefits influence retirement risk management.

Keywords: saving; investment; portfolio allocation; annuities; stocks; bonds; labor income uncertainty; retirement

Chapter.  5233 words.  Illustrated.

Subjects: Pensions

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.