Format of Original
Academy of Financial Services
Financial Services Review: the Journal of Individual Financial Management
Original Item ID
This paper demonstrates the dramatic effect of social security wealth on individuals’ asset allocation. We first discuss why social security wealth should be included in portfolio asset-mix decisions. We then draw parallels between social security benefits and inflation-indexed treasury bonds to help quantify the present value of social security benefits. Finally, we show the portfolio impact of including social security wealth under several asset-mix decision rules. Excluding social security wealth from the asset mix decision results in sub-optimal portfolios. Including social security wealth provides an incentive for including more stock in the asset mix.
Fraser, Steve; Jennings, William; and King, David, "Strategic Asset Allocation for Individual Investors: The Impact of the Present Value of Social Security Benefits" (2001). Management Faculty Research and Publications. 27.