Footnote:
In: in the Journal of Risk Management(리스크관리연구)
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 27, 2023 erstellt
Description:
We develop a new dynamic model of annuitization in which a constant relative risk aversion utility maximizing individual receives non-traded labor income and has to decide on her allocation between a stock and a risk-free asset, as well as decide on the time when she starts her retirement annuity at one distinct point in time i.e., at around optimal retirement age. The distinct feature of the paper results from its consideration for a two-state regime-switching market environment. We analytically derive regime-dependent thresholds of wealth for annuitization and quantitatively identify the target annuitization wealth levels under the carefully chosen baseline parameter values. In particular, we find that the target annuitization wealth level is smaller in the Bull market than in the bear market, thus accounting for the reality that U.S. individuals opted for early annuitization in the Bull market as observed in the late 1990's