Gomes, Francisco, Michaelides, Alexander and Polkovnichenko, Valery (2004) Portfolio choice and wealth accumulation with taxable and tax-deferred accounts. Discussion paper: UBS Pensions Series 028, 519. Financial Markets Group, London School of Economics and Political Science, London, UK.Full text not available from this repository.
We calibrate a life-cycle model with uninsurable labor income risk and borrowing constraints to match portfolio allocation and wealth accumulation profiles of direct and indirect stockholders in both taxable and tax-deferred accounts. Tax-deferred accounts generate an increase in wealth accumulation that is larger for wealthier households. Furthermore, while the cost of following a fixed contribution rate over the life cycle is small, the optimal rate can differ substantially across households, and the welfare losses from choosing the wrong one can be substantial. Finally, the welfare gain from having access to a tax-deferred account ranges from less than 0.1% to 11.5%, depending on the preference parameters.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 2004 The Authors|
|Library of Congress subject classification:||H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
|Sets:||Research centres and groups > Financial Markets Group (FMG)
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