Saving and investing for early retirement: A theoretical analysis
نویسندگان
چکیده
We study optimal consumption and portfolio choice in a framework where investors adjust their labor supply through an irreversible choice of their retirement time. We show that investing for early retirement tends to increase savings and reduce an agent’s effective relative risk aversion, thus increasing her stock market exposure. Contrary to common intuition, an investor might find it optimal to increase the proportion of financial wealth held in stocks as she ages and accumulates assets, even when her income and the investment opportunity set are constant. The model predicts a decrease in risk aversion following strong market gains like those observed in the nineties. r 2006 Elsevier B.V. All rights reserved. JEL classification: E21; G11; G12; J23
منابع مشابه
The Rodney L. White Center for Financial Research Saving and Investing for Early Retirement: A Theoretical Analysis
We study optimal consumption and portfolio choice in a framework where investors save for early retirement and assume that agents can adjust their labor supply only through an irreversible choice of their retirement time. We obtain closed form solutions and analyze the joint behavior of retirement time, portfolio choice, and consumption. Investing for early retirement tends to increase savings ...
متن کاملPreparing nurses for retirement: A concept analysis
Background and Purpose: Retirement is an important event in nurses’ life. Preparation and planning are the essential necessities before nurses get retired. Healthcare leaders play an important role in preparing nurses for retirement. This study aims to explore the process by which nurses were prepared for retirement. Methods: The theory development method according to Walker and Avant was...
متن کاملYou owe it to yourself: boosting retirement saving with a responsibility-based appeal.
Americans are not saving enough for retirement. Previous research suggests that this is due, in part, to people's tendency to think of the future self as more like another person than like the present self, making saving feel like giving money away rather than like investing in oneself. Using objective employer saving data, a field experiment capitalized on this phenomenon to increase saving. I...
متن کاملBRIEF REPORT You Owe It to Yourself: Boosting Retirement Saving With a Responsibility-Based Appeal
Americans are not saving enough for retirement. Previous research suggests that this is due, in part, to people’s tendency to think of the future self as more like another person than like the present self, making saving feel like giving money away rather than like investing in oneself. Using objective employer saving data, a field experiment capitalized on this phenomenon to increase saving. I...
متن کاملLongevity Risk, Retirement Savings, and Financial Innovation
Over the last couple of decades there have been unprecedented, and to some extent unexpected, increases in life expectancy which have raised important questions for retirement savings. We study optimal consumption and saving choices in a life-cycle model, in which we allow for changes in the distribution of survival probabilities, according to the Lee-Carter (1992) model. We allow individuals t...
متن کامل