Artikel

Optimal time to enter a retirement village

We consider the financial planning problem of a retiree wishing to enter a retirement village at a future uncertain date. The date of entry is determined by the retiree's utility and bequest maximisation problem within the context of uncertain future health states. In addition, the retiree must choose optimal consumption, investment, bequest and purchase of insurance products prior to their full annuitisation on entry to the retirement village. A hyperbolic absolute risk-aversion (HARA) utility function is used to allow necessary consumption for basic living and medical costs. The retirement village will typically require an initial deposit upon entry. This threshold wealth requirement leads to exercising the replication of an American put option at the uncertain stopping time. From our numerical results, active insurance and annuity markets are shown to be a critical aspect in retirement planning.

Sprache
Englisch

Erschienen in
Journal: Risks ; ISSN: 2227-9091 ; Volume: 5 ; Year: 2017 ; Issue: 1 ; Pages: 1-20 ; Basel: MDPI

Klassifikation
Wirtschaft
Thema
retirement village
optimal control
optimal stopping
HARA
American put option
long-term care needs
costs and products for the elderly
disability/health state transitions
life-cycle modelling related to the retirement phase

Ereignis
Geistige Schöpfung
(wer)
Zhang, Jinhui
Purcal, Sachi
Wei, Jiaqin
Ereignis
Veröffentlichung
(wer)
MDPI
(wo)
Basel
(wann)
2017

DOI
doi:10.3390/risks5010020
Handle
Letzte Aktualisierung
10.03.2025, 11:46 MEZ

Datenpartner

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Objekttyp

  • Artikel

Beteiligte

  • Zhang, Jinhui
  • Purcal, Sachi
  • Wei, Jiaqin
  • MDPI

Entstanden

  • 2017

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