@inbook {5185,
	title = {Utility Evaluation of Risk in Retirement Saving Accounts},
	booktitle = {Analyses in the Economics of Aging},
	year = {2005},
	note = {RDA ProCite field 6 : In ProCite field 8 : ed},
	publisher = {University of Chicago Press},
	organization = {University of Chicago Press},
	address = {Chicago},
	abstract = {The shift from defined benefit to defined contribution plans in the United States has drawn new attention to the effect of participants{\textquoteright} asset  allocation decisions on their financial resources for retirement. This paper develops a stochastic simulation algorithm to evaluate the effect of  holding a broadly diversified portfolio of common stocks, or a portfolio of index bonds, on the distribution of 401(k) account balances at  retirement. We compare the alternative distributions of retirement wealth both by showing the empirical distribution of potential wealth values, and  by computing the expected utility of these outcomes under standard assumptions about the structure of household preferences. Our analysis  highlights the critical role of other sources of wealth, such as Social Security, defined benefit pension annuities, and saving outside retirement  plans in determining the expected utility cost of holding equities in the retirement account. Our findings also demonstrate the importance of the  equity premium in affecting investors{\textquoteright} utility from different retirement asset allocations. Viewed from the beginning of a working career, and  given the historical pattern of returns on stocks and bonds, a household that does not have extremely high risk aversion would achieve a higher expected utility by holding a portfolio of stocks rather than bonds.},
	keywords = {Net Worth and Assets, Retirement Planning and Satisfaction},
	doi = {10.3386/w9892},
	author = {James M. Poterba and Joshua Rauh and Steven F Venti and David A Wise},
	editor = {David A Wise}
}
