Yuh, Hanna, and Montalto, ACCI, 1998


“Average” versus “Worst” case projections of financial assets and

contributions to retirement accounts



Yoonkyung Yuh(1), Sherman Hanna(2), and Catherine Phillips Montalto(3)




The asset allocation decision for retirement is one of the most important financial decisions of a
household. This decision has become more important due to the increase in the prevalence of
401(k) plans and related retirement saving programs, and the decrease in the use of defined-benefit
plans since the 1980s (Yuh & Hanna, 1997). Typically, financial planners use average rates of
return and measures of average risk in recommending asset allocations for their clients. However,
investors often invest for particular time periods and these time periods may include important
events (i.e., unusually high or low stock market performance) that affect the realized return on
assets. Therefore, both the minimum return and the average return from an investment should be
considered, especially for long term financial planning such as retirement. This study focuses on
“average” versus “worst” case projections of current financial assets and investigates factors
associated with the difference between the two. This analysis contributes information relevant to
public policy discussions related to pension plans, and to specific investment strategies for future
retirees.


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1. Dr. Yuh completed her Ph.D. in the Consumer Sciences Department, The Ohio State University, in Sept., 1998. E-mail: yuh@afcpe.org

2. Professor, Consumer Sciences Department, The Ohio State University, 1787 Neil Ave., Columbus, OH 43210-1295.
Phone: (614) 292-4584. Fax: (614) 292-7536. E-mail: hanna.1@osu.edu

3. Assistant Professor, Consumer Sciences Department, The Ohio State University, 1787 Neil Ave., Columbus, OH
43210-1295. Phone: (614) 292-4571. Fax: (614) 292-7536. E-mail: montalto.2@osu.edu