Working Paper: NBER ID: w7192
Authors: John B. Shoven; Clemens Sialm
Abstract: The optimal allocation of assets among different asset classes (such as stocks and bonds) has received considerable attention in financial theory and practice. On the other hand, investors have not been given much guidance about which assets should be located in tax-deferred retirement accounts and which in conventional savings accounts. This paper derives optimal asset allocations (which assets to hold) and asset locations (where to hold them) for a risk-averse investor saving for retirement. Locating assets optimally can significantly improve the risk-adjusted performance of retirement savings.
Keywords: No keywords provided
JEL Codes: G11; G23; H24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax environment (H26) | after-tax returns (H24) |
| tax environment (H26) | variance (C46) |
| investments in tax-deferred accounts (H26) | expected returns (G17) |
| investments in tax-deferred accounts (H26) | variance (C46) |
| optimal asset location (G11) | risk-adjusted performance of retirement savings (D14) |
| tax rates (H29) | preferred asset location (R53) |
| expected returns (G17) | preferred asset location (R53) |
| variance (C46) | preferred asset location (R53) |