Theoretical considerations on the retirement consumption puzzle and the optimal age of retirement

Nicolas Drouhin ()

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Abstract: Defining retirement as a discontinuity in the labor supply of the agent, this paper resolves the retirement consumption puzzle in a very general model of in-tertemporal choice of consumption and savings of a fully rational, forward looking, agent. Building on a specific version of Bellman (1957) principle of optimality, it provides a very general and parsimonious formula for determining the optimal age of retirement taking into account the possible discontinuity of the optimal consumption profile at the age of retirement. Code JEL: C61 D91 J26

Keywords: life cycle theory of consumption and saving; optimal retirement; retirement consumption puzzle; discontinuous optimal control (search for similar items in EconPapers)
Date: 2018-04-15
New Economics Papers: this item is included in nep-age and nep-dge
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