Optimal retirement savings over the life cycle: a deterministic analysis in closed form

DOI10.1016/J.INSMATHECO.2023.05.010MaRDI QIDQ6072265zbMATH OpenFDO

Authors Marcel Fischer, Bjarne Astrup Jensen, M. Koch

Publication date 12 October 2023

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1016/J.INSMATHECO.2023.05.010

zbMATH Keywords

analytical solutionborrowing constraintslabor incomeretirement savingtax-deferred investing

Mathematics Subject Classification ID

Actuarial mathematics (91G05)

Review text

The paper focuses on the life cycle consumption-savings problem within a scenario where a risk-free investment opportunity, a tax-deferred retirement account, and deterministic labor income are included. At first, the study deals with an unrestricted version of the consumption-savings problem in which individuals can borrow against future labor income. This version is then extended by the introduction of a non-negativity constraint on wealth, so achieving optimal consumption-savings decisions. Moreover, the paper considers a consumption-savings model that offers additional opportunities to save in a tax-deferred retirement account. So, the savings decision constitutes an asset location decision. Finally, some generalizations are presented.

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Cites work

• Age-dependent investing: optimal funding and investment strategies in defined contribution pension plans when members are rational life cycle financial planners
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Cited in

(4)

• Optimal Asset Allocation for Retirement Saving: Deterministic Vs. Time Consistent Adaptive Strategies
• IMPLEMENTING INDIVIDUAL SAVINGS DECISIONS FOR RETIREMENT WITH BOUNDS ON WEALTH
• Optimal portfolio choice of couples with tax-deferred accounts and survival-contingent products
• Optimal life insurance and annuity decisions under money illusion

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