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Theoretical considerations on the retirement consumption puzzle and the optimal age of retirement
1 : École Normale Supérieure de Cachan
(ENS Cachan)
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Website
École normale supérieure [ENS] - Cachan, École normale supérieure (ENS) - Cachan
61, avenue du Président Wilson - 94230 Cachan -
France
2 : Centre de Recherche en Économie et Statistique
(CREST)
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Website
Centre de Recherche en Économie et STatistique (CREST)
Defining retirement as a discontinuity in the labor supply of the agent, this paper resolves the retirement consumption puzzle in avery general model of intertemporal choice of consumption ans savings of a fully rational, forward looking, agent. Building on a specific version of Bellman(1957) principle of optimality, it provides a very general and parsimonious formula for determining the optimal age of retirement taking into account the possible discontinuity of the optimal consumption profile at the age of retirement.
