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

Geonwoo Kim and Junkee Jeon ()
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Geonwoo Kim: School of Natural Sciences, Seoul National University of Science and Technology, Seoul 01811, Republic of Korea
Junkee Jeon: Department of Applied Mathematics, Kyung Hee University, Yongin 17104, Republic of Korea

Mathematics, 2025, vol. 13, issue 17, 1-16

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.

Keywords: job-switching; portfolio choice; finite-horizon optimization; dual-martingale method; consumption–leisure trade-off; stochastic control (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2025
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