Taxes, time diversification, and asset choice at retirement

Thomas Howe () and David Mistic ()

Journal of Economics and Finance, 2003, vol. 27, issue 3, 404-421

Abstract: This study extends existing research by examining the effect of personal income taxes on the expected relative performance of asset classes as viewed from the retirement date. Results suggest that tax status does not affect the basic conclusions of previous time diversification studies. However, the fund's tax status affects the size of withdrawals that can be sustained, the performance of stocks relative to bonds, and the risk of the retirement fund. In general, for a given size fund and after-tax withdrawal proportion, tax-deferred funds have not only a greater expected return, but also greater risk than non-tax-deferred retirement funds. *** DIRECT SUPPORT *** A00DH017 00009 Copyright Springer 2003

Date: 2003
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DOI: 10.1007/BF02761574

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