Time inconsistency and retirement choice

Hyperbolic discounting with naiveté is widely believed to provide a better explanation than exponential discounting of why people borrow so much and why they wait so long to save for retirement. We reach a different set of conclusions. We show that if financial planning is enriched to include the choice of when to retire, then naive hyperbolic discounters may borrow far less and start saving for retirement significantly earlier than exponential discounters.

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Year of publication:	2015
Authors:	Findley, T. Scott ; Caliendo, Frank N.
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 129.2015, C, p. 4-8
Publisher:	Elsevier
Subject:	Hyperbolic discounting \| Naiveté \| Retirement choice \| Time inconsistency \| Life-cycle consumption and saving

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Type of publication:	Article
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; D03 - Behavioral Economics; Underlying Principles ; D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Source:	RePEc - Research Papers in Economics

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