The Determination of Optimal Retirement Age Using Optimal Control Theory

20 Pages Posted: 19 Jul 2011

See all articles by Krzysztof Ostaszewski

Krzysztof Ostaszewski

Illinois State University

Hong Mao

Shanghai Second Polytechnic University

Yuling Wang

Shanghai University of Finance and Economics

Date Written: June 20, 2011

Abstract

In this paper, we discuss how to determine optimal retirement age using an optimal control theory. We establish a life cycle model and analyze the factors of consumption, leisure, saving, mortality and retirement behaviors simultaneously with an orthogonal–array experimental design. Our results show that the initial salary level and the growth rate of salary are the most important determining factors of the optimal retirement age. The initial consumption level and the interest rate are also important factors affecting optimal retirement age. The mortality improvement has a minor effect on the optimal retirement age. The effects of the Social Security on the optimal retirement age depend on the Social Security tax and the Social Security benefit.

Keywords: retirement age, optimal control theory, social security

JEL Classification: C0

Suggested Citation

Ostaszewski, Krzysztof and Mao, Hong and Wang, Yuling, The Determination of Optimal Retirement Age Using Optimal Control Theory (June 20, 2011). Available at SSRN: https://ssrn.com/abstract=1888016 or http://dx.doi.org/10.2139/ssrn.1888016

Krzysztof Ostaszewski (Contact Author)

Illinois State University ( email )

Department of Mathematics
Normal, IL 61790-4520
United States
+1-309-438-7226 (Phone)
+1-309-438-5866 (Fax)

HOME PAGE: http://math.illinoisstate.edu/krzysio

Hong Mao

Shanghai Second Polytechnic University ( email )

No.2360, Jinhai Road
Shanghai, 201209
China

Yuling Wang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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