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

Motohiro Yogo ()

No 15307, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a consumption and portfolio-choice model of a retiree who allocates wealth in four asset classes: a riskless bond, a risky asset, a real annuity, and housing. The retiree chooses health expenditure endogenously in response to stochastic depreciation of health. The model is calibrated to explain the joint dynamics of health expenditure, health, and asset allocation for retirees in the Health and Retirement Study, aged 65 and older. The calibrated model is used to assess the welfare gain from private annuitization. The welfare gain ranges from 13 percent of wealth at age 65 for those in worst health, to 18 percent for those in best health.

JEL-codes: D91 G11 I10 J26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea and nep-ure
Date: 2009-09
Note: AG AP HE
View list of references

Downloads: (external link)
http://www.nber.org/papers/w15307.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing and Risky Assets
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:15307

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w15307
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().