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Optimal Retirement Age and Lower Bound on Interest Rate

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  • Nalinaksha Bhattacharyya

Abstract

For a long time now, the monetary policies in the US and other industrialized countries have been a regime of cheap money with the interest rate often being negative. A low interest rate in the framework of the Keynesian monetary policy stimulates demand but is hard on the retirees who are mostly on a fixed income. This paper generates a simple model to understand the interaction between current wealth, savings rate, interest rate and retirement age. The model also suggests a lower bound on the interest rate. The minimum interest rate at which Americans of median age with median wealth and median income, and retiring at the age of 67, turns out to be 10%.

Suggested Citation

  • Nalinaksha Bhattacharyya, 2024. "Optimal Retirement Age and Lower Bound on Interest Rate," Accounting and Finance Research, Sciedu Press, vol. 13(1), pages 1-1, February.
    • Handle: RePEc:jfr:afr111:v:13:y:2024:i:1:p:1
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    References listed on IDEAS

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    2. Lopez, Jose A. & Rose, Andrew K. & Spiegel, Mark M., 2020. "Why have negative nominal interest rates had such a small effect on bank performance? Cross country evidence," European Economic Review, Elsevier, vol. 124(C).
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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