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Can Utility-Maximization Models Assist With Retirement Planning?, Zaki Khorasanee

Journal of Actuarial Practice (1993-2006)

Utility-maximization models for optimizing portfolio choices can be subdivided into two classes: those based on maximizing the expected utility of lifetime consumption and those based on maximizing the expected utility of retirement wealth. It is argued that the first type of model, which optimizes both saving and investment decisions, is difficult to apply in practice because of inadequate (or unreliable) information about individual preferences. Although the second type of model only optimizes investment decisions, it is of greater practical value because fewer data on individual preferences are required. The second type of model is used to derive formulae for the …