The paper describes a model that evaluates the solvency of a portfolio of assets and liabilities of an insurer subject to longevity risk and financial risks. Liabilities are evaluated at fair-value. Interest-rate risk can affect both assets and liabilities. Longevity risk is described via a...

We study portfolio choice for a finite-horizon investor whose labor income is cointegrated with inflation. We show that this long-run relationship has substantial impact on the riskiness of human capital and consequently on the optimal portfolio strategy. Because cointegration raises the...

Increasing life expectancy has made working longer both more necessary and more possible, but the relationship between an individual's survival expectations and his planned retirement age is unclear in the existing literature. This study uses the Health and Retirement Study and an instrumental...

Americans' indebtedness increased dramatically since the 1980s — a trend likely to have important implications for retirement security. On one hand, higher indebtedness might compel individuals to keep working and delay Social Security benefit claiming so they can pay off their financial...

We study the role of household saving behaviour, of individual motives for saving and that of perceived liquidity constraints on household finances in 15 Euro Area countries. The empirical analysis is based on the Household Finance and Consumption Survey, a new harmonized data set collecting...

This paper explores the financial sustainability of a typical U.S. state defined-benefit pension fund under the continuation of current policies and under alternative policies, such as alternative contribution, indexation and investment allocation policies. We explore the "classic"...

We model uncertainty of financial parameters and examine its impact on the replacement rate in a DC pension contract. To this end, we develop a novel Bayesian framework that reveals substantial reduction in the lower percentiles for the replacement rate at retirement. We identify that the key...

This paper examines the role of time preferences in career investments. We focus on the effects of impatience on two types of career investments: work effort and on-the-job search. Whereas the former increases the probability of obtaining a promotion, the latter affects the chance of receiving...

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...

In this study we gauge the impact of social interactions on individual retirement preferences. A survey including self-assessments and vignette questions shows that individual preferences are affected by preferences and actual retirement behavior of the social environment. Retirement from paid...