A Savings Plan With Targeted Contributions. Issue 4 (6th August 2012)

• Record Type: Journal Article
• Authors: Owadally, Iqbal; Haberman, Steven; Gómez Hernández, Denise
• Is Part Of: Journal of risk and insurance. Volume 80:Issue 4(2013)
• Page Start: 975
• Page End: 1000
• Publication Date: 2012-08-06
• Subjects: Insurance -- United States -- Periodicals; 368.97305
• DOI: 10.1111/j.1539-6975.2012.01485.x
• Languages: English
• ISSNs: 0022-4367

Abstract

<abstract abstract-type="main" xml:lang="en"> <title>A<sc>BSTRACT</sc></title> <sec id="jori1485-sec-0001" sec-type="section"> <p>We consider a simple savings problem where contributions are made to a fund and invested to meet a future liability. The conventional approach is to estimate future investment return and calculate a fixed contribution to be paid regularly by the saver. We propose a flexible plan where contributions are systematically adjusted and targeted. We show by means of stochastic simulations that this plan has a reduced risk of a shortfall and is relatively insensitive to errors in the planner's estimate of future returns. Sensitivity analyses in terms of parameter values, stochastic return models and investment horizons are also performed.</p> </sec> </abstract>