Wharton Pension Research Council Working Papers


The Effect of Uncertain Labor Income and Social Security on Life-cycle Portfolios

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Working Paper

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This paper examines how labor income volatility and social security benefits influence life-cycle household portfolios. We examine how much the individual saves, and where, 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.


The published version of this Working Paper may be found in the 2010 publication: Reorienting Retirement Risk Management.

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Copyright/Permission Statement

Opinions and errors are solely those of the authors and not of the institutions with whom the authors are affiliated. This is part of the NBER Program on the Economics of Aging. © 2009 Maurer, Mitchell, and Rogalla. © 2009 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


This research was conducted with support from the Pension Research Council at The Wharton School of the University of Pennsylvania. We are grateful for useful comments from Jason Scott and Ramu Thiagarajan.



Date Posted: 23 August 2019