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Effect of lifetime uncertainty on consumption/investment with luxury bequest motives

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  • Choi, Sungsub
  • Kim, Sungjun
  • Shim, Gyoocheol

Abstract

We study optimal consumption/investment of a retiree who has luxury bequest motives and faces the nonnegative bequest constraint. His lifetime is uncertain but actuarially fair life insurance-annuity policies are available. We obtain a closed form solution by using a dynamic programming method, and investigate the effects of lifetime uncertainty and the presence of life insurance-annuity on the consumption/investment policies.

Suggested Citation

  • Choi, Sungsub & Kim, Sungjun & Shim, Gyoocheol, 2016. "Effect of lifetime uncertainty on consumption/investment with luxury bequest motives," Finance Research Letters, Elsevier, vol. 17(C), pages 275-279.
    • Handle: RePEc:eee:finlet:v:17:y:2016:i:c:p:275-279
    DOI: 10.1016/j.frl.2016.03.027
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    References listed on IDEAS

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