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Optimal Job-Switching and Portfolio Decisions with a Mandatory Retirement Date

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  • Geonwoo Kim

    (School of Natural Sciences, Seoul National University of Science and Technology, Seoul 01811, Republic of Korea
    These authors contributed equally to this work.)

  • Junkee Jeon

    (Department of Applied Mathematics, Kyung Hee University, Yongin 17104, Republic of Korea
    These authors contributed equally to this work.)

Abstract

We study a finite-horizon optimal job-switching and portfolio allocation problem where an agent faces a mandatory retirement date. The agent can freely switch between two jobs with differing levels of income and leisure. The financial market consists of a risk-free asset and a risky asset, with the agent making dynamic consumption, investment, and job-switching decisions to maximize lifetime utility. The utility function follows a Cobb–Douglas form, incorporating both consumption and leisure preferences. Using a dual-martingale approach, we derive the optimal policies and establish a verification theorem confirming their optimality. Our results provide insights into the trade-offs between labor income and leisure over a finite career horizon and their implications for retirement planning and investment behavior.

Suggested Citation

  • Geonwoo Kim & Junkee Jeon, 2025. "Optimal Job-Switching and Portfolio Decisions with a Mandatory Retirement Date," Mathematics, MDPI, vol. 13(17), pages 1-16, September.
    • Handle: RePEc:gam:jmathe:v:13:y:2025:i:17:p:2809-:d:1739678
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