Work

Optimal Job-Switching and Portfolio Decisions with a Mandatory Retirement Date

Year: 2025

Type: article

Abstract: We study a finite-horizon optimal job-switching and portfolio allocation problem where an agent faces a mandatory retirement date. The agent can freely switch between two jobs with differing levels of income and leisure. The financial market consists of a risk-free asset and a risky asset, with the agent making dynamic consumption, investment, and job-switching decisions to maximize lifetime utility. The utility function follows a Cobb–Douglas form, incorporating both consumption and leisure preferences. Using a dual-martingale approach, we derive the optimal policies and establish a verification theorem confirming their optimality. Our results provide insights into the trade-offs between labor income and leisure over a finite career horizon and their implications for retirement planning and investment behavior.

Source: Mathematics

DOI: 10.3390/math13172809

Authors: Geonwoo Kim, Junkee Jeon

Institutions: Seoul National University of Science and Technology, Kyung Hee University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $3,137