Household financial planning strategies for managing longevity risk
Date
2018-09-19
Authors
Bajtelsmit, Vickie L., author
Wang, Tianyang, author
Financial Planning Review, publisher
Journal Title
Journal ISSN
Volume Title
Abstract
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 longāterm 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.
Description
Includes bibliographical references (pages 24-25).
Published as: Financial Planning Review, vol. 1, no. 1-2, September 2018, e1007, https://doi.org/10.1002/cfp2.1007.
Published as: Financial Planning Review, vol. 1, no. 1-2, September 2018, e1007, https://doi.org/10.1002/cfp2.1007.
Rights Access
Subject
financial planning
household risk management
longevity risk
retirement plan