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  3. American Economic Journal: Macroeconomics
  4. July 2018
  5. The Role of Annuitized Wealth in Post-retirement Behavior

The Role of Annuitized Wealth in Post-retirement Behavior

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Abstract

This paper develops a tractable model of post-retirement behavior with health status uncertainty and state-verification difficulties. The model distinguishes between annuitized and non-annuitized wealth and features means-tested Medicaid assistance with nursing home care. We show how to solve the potentially complex dynamic problem analytically, making it possible to characterize optimal behavior with phase diagrams. The analysis provides an integrated treatment of portfolio composition and consumption/wealth accumulation choices. We show the model can explain both the "retirement-saving puzzle" and the "annuity puzzle."

Citation

Laitner, John, Dan Silverman, and Dmitriy Stolyarov. 2018. "The Role of Annuitized Wealth in Post-retirement Behavior." American Economic Journal: Macroeconomics, 10 (3): 71-117. DOI: 10.1257/mac.20160343

Additional Materials

JEL Classification

  • D14 Household Saving; Personal Finance
  • D15 Intertemporal Household Choice; Life Cycle Models and Saving
  • G11 Portfolio Choice; Investment Decisions
  • I18 Health: Government Policy; Regulation; Public Health
  • I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
  • J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
  • J26 Retirement; Retirement Policies
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