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A generalization of Yaari’s result on annuitization with optimal retirement

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  • Park, Seyoung

Abstract

In this paper we generalize the following result of Yaari (1965) on annuitization with an agent’s optimal retirement: it is optimal for individuals to annuitize all of their wealth in the absence of bequest motive. We have other results that refine or extend the result of Yaari (1965). Full annuitization can be viewed as an American-type option that allows an economic agent to exchange the value of labor income with the extra leisure that is brought about by annuitizing all of her wealth. When the agent’s wealth is above a certain wealth threshold, annuitization is triggered, otherwise it is not. Accordingly, wealth plays a key role in controlling the distance to full annuitization.

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  • Park, Seyoung, 2015. "A generalization of Yaari’s result on annuitization with optimal retirement," Economics Letters, Elsevier, vol. 137(C), pages 17-20.
    • Handle: RePEc:eee:ecolet:v:137:y:2015:i:c:p:17-20
    DOI: 10.1016/j.econlet.2015.10.010
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    References listed on IDEAS

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    1. Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005. "Annuities and Individual Welfare," American Economic Review, American Economic Association, vol. 95(5), pages 1573-1590, December.
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    Cited by:

    1. Jang, Bong-Gyu & Koo, Hyeng Keun & Park, Seyoung, 2019. "Optimal consumption and investment with insurer default risk," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 44-56.
    2. Park, Seyoung, 2020. "Verification theorems for models of optimal consumption and investment with annuitization," Mathematical Social Sciences, Elsevier, vol. 103(C), pages 36-44.
    3. Luo, Shangzhen & Wang, Mingming & Zhu, Wei, 2022. "Time-inconsistent life-cycle consumption and retirement choice with mortality risk," Applied Mathematics and Computation, Elsevier, vol. 433(C).

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