Household Financial Planning Strategies for Managing Longevity Risk

Posted: 12 Nov 2019

See all articles by Vickie L. Bajtelsmit

Vickie L. Bajtelsmit

Colorado State University, Fort Collins

Tianyang Wang

Colorado State University - Department of Finance & Real Estate

Date Written: September 19, 2018

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 longā€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

Suggested Citation

Bajtelsmit, Vickie L. and Wang, Tianyang, Household Financial Planning Strategies for Managing Longevity Risk (September 19, 2018). Financial Planning Review, Vol. 1, Issue 1-2, March-June 2018, Available at SSRN: https://ssrn.com/abstract=3485637

Vickie L. Bajtelsmit (Contact Author)

Colorado State University, Fort Collins ( email )

Fort Collins, CO 80523-1771
United States

Tianyang Wang

Colorado State University - Department of Finance & Real Estate ( email )

Finance and Real Estate Department
1272 Campus Delivery
Fort Collins, CO 80523
United States

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