Asset Allocation for Retirement: Simple Heuristics and Target Date Funds

Journal of Financial Planning, March 2010

Posted: 20 May 2010

See all articles by Steven D. Dolvin

Steven D. Dolvin

Butler University

William J. Rieber

Butler University

William K. Templeton

Butler University - College of Business Administration

Date Written: March 2010

Abstract

We examine common asset allocation strategies for retirement investing, considering both static and dynamic approaches, as well as those allocation policies used by leading target date fund providers. We find that, over time, certain static approaches are essentially equivalent to dynamic strategies that reduce equity exposure through time. Further, we find that most target date fund providers appear to target a dynamic 120-age equity allocation. We suggest that financial planners consider a 100 percent equity allocation for their clients until approximately ten years prior to a client’s retirement, at which point a more conservative allocation should be employed.

Keywords: asset allocation, retirement investing, heuristics

JEL Classification: G11

Suggested Citation

Dolvin, Steven D. and Rieber, William J. and Templeton, William K., Asset Allocation for Retirement: Simple Heuristics and Target Date Funds (March 2010). Journal of Financial Planning, March 2010, Available at SSRN: https://ssrn.com/abstract=1612232

Steven D. Dolvin (Contact Author)

Butler University ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

William J. Rieber

Butler University ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States
317-940-9006 (Phone)
317-940-9455 (Fax)

William K. Templeton

Butler University - College of Business Administration ( email )

Indianapolis, IN 46208
317-940-9419 (Phone)
317-940-9455 (Fax)

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