Bifurcation in optimal retirement

2025/06/02 by Ashraf, Bushra Shehnam, Salisbury, Thomas S.
#91G05 #91G10 #FOS: Economics and business #Portfolio Management (q-fin.PM)

paper · doi:10.48550/arxiv.2506.02155

Abstract

We study optimal consumption and retirement using a Cobb-Douglas utility and a simple model in which an interesting bifurcation arises. With high wealth, individuals plan to retire. With low wealth they plan to never retire. At a critical level of initial wealth they may choose to defer this decision, leading to a continuum of wealth trajectories with identical utilities.

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