Gomes, Francisco, Michaelides, Alexander and Polkovnichenko, Valery (2005) Wealth accumulation and portfolio choice with taxable and tax-deferred accounts. 4852. Centre for Economic Policy Research, London, UK.Full text not available from this repository.
We calibrate a life-cycle model with uninsurable labour income risk and borrowing constraints to match wealth accumulation and portfolio allocation 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:||© 2005 Francisco J. Gomes, Alexander Michaelides and Valery Polkovnichenko|
|Uncontrolled Keywords:||liquidity constraints; portfolio choice; retirement savings; tax-deferred accounts; uninsurable labour income risk|
|Library of Congress subject classification:||H Social Sciences > HG Finance|
|Journal of Economic Literature Classification System:||G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions|
|Sets:||Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
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