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Key Findings Details

Extending Life Cycle Models of Optimal Portfolio Choice: Integrating Flexible Work, Endogenous Retirement, and Investment Decisions with Lifetime Payouts
Jing Jing Chai, Wolfram J. Horneff, Raimond H. Maurer and Olivia S. Mitchell
WP 2009-204

  • Having access to annuities is positive and important in the life cycle context, as is labor market flexibility in the form of adjustable weekly work hours and retirement ages.
  • People with flexible retirement and flexible work hours, in addition to annuitized saving, are much better off. Their gain in well-being is worth more than 62 percent of their first-year earnings.
  • As Baby Boomers move towards retirement, traditional fixed-payout annuities will gradually be replaced by investment-linked payout annuities.