Dr. Paul Kaplan
speaker
479 appearances
1 recordings
1 series
first heard Jul 2026
last heard 9 Jul
Dr. Paul Kaplan’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 1 in all, peaking in Jul 2026 with 1.
Appearances
How much do they discount future consumption versus present consumption?
Also, how flexible they are in changing consumption from one period to the next.
So how much do they value consumption in one period versus another period?
Another component is bequests, preferences regarding their bequests, which would determine how big a bequest they're going to give.
And then thirdly, the risk tolerance.
And risk tolerance is something very distinct.
from risk capacity, and we can talk more about that, how in common practice, risk capacity and risk tolerance are often conflated, but they're really very different concepts.
So the risk tolerance that we use in the lifecycle component is also the same risk tolerance we use in the asset allocation part of the model.
And then most importantly is this idea of the economic balance sheet.
And just as a company has a balance sheet with assets and liabilities, so does any individual household.
On the asset side, they have their financial wealth, but they also have their human capital.
And on the liability side, they have what we call their liabilities, which is the present discounted value of future non-discretionary consumption, and then their net worth.
And so that entire balance sheet gets fed into...
what we call a net worth optimization model, which then determines the S allocation.
the insights that just come of any life cycle model are very essential and important in financial planning, which is taking a holistic view of the whole process, focusing on consumption, because after all, the purpose of savings and investing is to be able to fund a person's consumption
smoothly over the course of their lifetime, the conventional approach is that it might have a saving role, it might have a spend-down role during retirement, and it may have an asset allocation, all of which could also be disjointed from each other.
So the fundamental insight is all these things work together and that consumption should be the focus of any kind of plan for a lifetime.
We do have some unique features in our model are the net worth optimization I was just describing earlier is a unique component and an important insight.
And also some of the details about consumption when there's uncertainty, when you're investing in assets that have uncertain future returns, how that should impact your consumption.
What the net worth optimization does is it takes the economic balance sheet that comes from the life cycle model.
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