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Effect of lifetime uncertainty on consumption/investment with luxury bequest motives

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  • Choi, Sungsub
  • Kim, Sungjun
  • Shim, Gyoocheol

Abstract

We study optimal consumption/investment of a retiree who has luxury bequest motives and faces the nonnegative bequest constraint. His lifetime is uncertain but actuarially fair life insurance-annuity policies are available. We obtain a closed form solution by using a dynamic programming method, and investigate the effects of lifetime uncertainty and the presence of life insurance-annuity on the consumption/investment policies.

Suggested Citation

  • Choi, Sungsub & Kim, Sungjun & Shim, Gyoocheol, 2016. "Effect of lifetime uncertainty on consumption/investment with luxury bequest motives," Finance Research Letters, Elsevier, vol. 17(C), pages 275-279.
    • Handle: RePEc:eee:finlet:v:17:y:2016:i:c:p:275-279
    DOI: 10.1016/j.frl.2016.03.027
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    References listed on IDEAS

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    2. Wei Han & Ping Wang & Hongjie Dong, 2020. "Influence of Egoistic and Altruistic Bequest Motives on the Willingness to Participate in Reverse Mortgages in China," Asian Economic Journal, East Asian Economic Association, vol. 34(4), pages 430-463, December.

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