351. Household financial planning strategies for managing longevity risk
- Author
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Tianyang Wang and Vickie L. Bajtelsmit
- Subjects
Inflation ,Consumption (economics) ,050208 finance ,Public economics ,Longevity risk ,business.industry ,media_common.quotation_subject ,05 social sciences ,Longevity ,Financial plan ,Investment (macroeconomics) ,0502 economics and business ,Life expectancy ,Economics ,050207 economics ,business ,Risk management ,media_common - Abstract
[enter Abstract Body]This study examines how longevity risk, in conjunction with other postretirement risks, impacts retirement consumption decisions and retirement wealth needs. We develop a theoretical model that directly examines the relationship between longevity risk and consumption/savings, and empirically test these theoretical implications by simulating retirement outcomes for representative households, including longevity, inflation, investment, health, and long‐term care risks. Our study shows that the top third of households by longevity need approximately 20% more retirement wealth than those households who live only an average life span. Investigations of various risk mitigation strategies suggest that combination strategies, particularly those that include delayed retirement, can significantly reduce the retirement wealth target. This research provides valuable new insights on household financial planning strategies for managing longevity risk. Full Text Available Here: https://doi.org/10.1002/cfp2.1007
- Published
- 2018
- Full Text
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