| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5058647 | Economics Letters | 2015 | 4 Pages |
â¢We generalize the result of Yaari (1965) on annuitization with optimal retirement.â¢An agent adjusts labor supply through an irreversible choice of annuitization time.â¢When an agent's wealth is above a certain wealth threshold, annuitization is triggered.
In this paper we generalize the following result of Yaari (1965) on annuitization with an agent's optimal retirement: it is optimal for individuals to annuitize all of their wealth in the absence of bequest motive. We have other results that refine or extend the result of Yaari (1965). Full annuitization can be viewed as an American-type option that allows an economic agent to exchange the value of labor income with the extra leisure that is brought about by annuitizing all of her wealth. When the agent's wealth is above a certain wealth threshold, annuitization is triggered, otherwise it is not. Accordingly, wealth plays a key role in controlling the distance to full annuitization.
