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How Persistent Low Returns Will Shape Saving and Retirement$
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Olivia S. Mitchell, Robert Clark, and Raimond Maurer

Print publication date: 2018

Print ISBN-13: 9780198827443

Published to Oxford Scholarship Online: October 2018

DOI: 10.1093/oso/9780198827443.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 17 June 2021

Intelligent Risk Taking

Intelligent Risk Taking

How to Secure Retirement in a Low Expected Return World

(p.81) Chapter 6 Intelligent Risk Taking
How Persistent Low Returns Will Shape Saving and Retirement

Antti Ilmanen

Matthew Rauseo

Oxford University Press

Peoples’ ability to consume in retirement is a function of how much they save, how they invest, and what those investments return over the lifecycle. This chapter explores what rate of return is needed to deliver a comfortable retirement based on current savings rates, as well as intelligent ways to construct portfolios to achieve this rate of return. Based on reasonable long-term return assumptions, defined contribution portfolios as frequently constructed today are unlikely to achieve this required rate of return. By relaxing existing constraints and taking advantage of well-known and broadly accepted investment themes, this required rate of return can be achieved with a well-diversified portfolio, which may lead to a more consistent portfolio across different economic environments.

Keywords:   defined contribution plan, Target Date Funds, alternative risk premia, style investing, smart beta, risk parity

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