RT Journal Article SR Electronic T1 Measuring the Cost of Risk Reduction in Tax-Deferred Investing JF The Journal of Wealth Management FD Institutional Investor Journals SP 78 OP 81 DO 10.3905/jwm.11.2.78 VO 11 IS 2 A1 W. Cris Lewis YR 2008 UL https://pm-research.com/content/11/2/78.abstract AB This article uses a deterministic approach to quantitatively measure the cost of risk reduction associated with the periodic rebalancing of a tax-deferred portfolio between higher risk assets (equities) and lower-risk assets (bonds). The cost of risk is defined as the difference in annuity income at retirement between a non-rebalanced portfolio and an annually rebalanced portfolio. The author finds that the cost of risk reduction is 22-24% of annuitized retirement income. The author also shows that the gain from using a Roth-type account (with after-tax contributions and tax-free distributions) varies between 9.5% and 16.3% of retirement income compared to the level of retirement income generated by the more typical tax-deferred plan.TOPICS: Portfolio construction, risk management, legal/regulatory/public policy