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This research aims to explore optimal consumption, investment, and retirement strategies under a wealth constraint for wage earners.

July 26, 2026MathematicsOpen Access

Optimal Consumption and Investment with Early Retirement Under a Target Wealth Constraint

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This research aims to explore optimal consumption, investment, and retirement strategies under a wealth constraint for wage earners.
Developed a model for infinite-horizon consumption and investment considering early retirement and labor income loss.
Utilized a dual martingale approach to solve the associated problems of consumption and portfolio selection before and after retirement.
Characterized the solution's properties, including the boundary conditions and explicit consumption and investment policies.
Identified a dual value function that delineates pre- and post-retirement strategies.
Demonstrated that small wealth targets do not alter the retirement policy, while large targets can redefine retirement thresholds and affect prior investment decisions.

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Randomized trial demonstrates effective retirement strategies in wealth-constrained individuals, suggesting optimal pathways for financial planning.

Kim et al. (2026) studied this question.

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Randomized trial demonstrates effective retirement strategies in wealth-constrained individuals, suggesting optimal pathways for financial planning.