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Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets

Listed author(s):
  • Motohiro Yogo

In a life-cycle model, a retiree faces stochastic health depreciation and chooses consumption, health expenditure, and the allocation of wealth between bonds, stocks, and housing. The model explains key facts about asset allocation and health expenditure across health status and age. The portfolio share in stocks is low overall and is positively related to health, especially for younger retirees. The portfolio share in housing is negatively related to health for younger retirees and falls significantly in age. Finally, out-of-pocket health expenditure as a share of income is negatively related to health and rises in age.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15307.

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Date of creation: Sep 2009
Publication status: published as Yogo, Motohiro, 2016. "Portfolio choice in retirement: Health risk and the demand for annuities, housing, and risky assets," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 17-34.
Handle: RePEc:nbr:nberwo:15307
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