Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258389 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 14 [Issue:] 7 [Article No.:] 285 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-25
Publisher: 
MDPI, Basel
Abstract: 
This paper considers investors who are looking to maximize their probability of remaining solvent throughout their lifetime by using an algorithm that aims to optimize their investment allocation strategy and optimize their tax strategy for withdrawal allocations between tax deferred accounts (TDAs), Roth accounts, and taxable stock and bond accounts. This optimization works with stochastic investment returns and stochastic mortality, extending and combining different investment and tax-efficiency paradigms. We find that optimizing the investment strategy has a much larger impact on the investor remaining solvent than optimizing the tax strategy. This result is key to effectively optimizing both strategies simultaneously. This optimized investment strategy soundly beats a standard target date fund strategy, and the novel optimized tax strategy displays optimal desired properties suggested by non-stochastic tax optimization research.
Subjects: 
dynamic programming
goals-based wealth management
Monte Carlo methods
mortality
optimal strategy
retirement planning
Roth accounts
tax deferred accounts
taxable accounts
taxes
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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