Theoretical considerations on the retirement consumption puzzle and the optimal age of retirement
Résumé
Defining retirement as a discontinuity in the labor supply of the agent, this paper resolves the retirement consumption puzzle in a very general model of in-tertemporal choice of consumption and savings of a fully rational, forward looking, agent. Building on a specific version of Bellman (1957) principle of optimality, it provides a very general and parsimonious formula for determining the optimal age of retirement taking into account the possible discontinuity of the optimal consumption profile at the age of retirement. Code JEL: C61 D91 J26
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