title: Portfolio choice in retirement: Health risk and the demand for annuities, housing, and risky assets.
abstract: In a life-cycle model, a retiree faces stochastic health depreciation and chooses consumption, health expenditure, and the allocation of wealth between bonds, stocks, and housing. The model explains key facts about asset allocation and health expenditure across health status and age. The portfolio share in stocks is low overall and is positively related to health, especially for younger retirees. The portfolio share in housing is negatively related to health for younger retirees and falls significantly in age. Finally, out-of-pocket health expenditure as a share of income is negatively related to health and rises in age.
authors.affiliation: Princeton University, Department of Economics, 26 Prospect Avenue, Princeton, NJ 08540-5296, United States, and NBER. Tel.: +1 609 258 4467.
authors.forename: Motohiro
authors.initials: M
authors.lastname: Yogo
keywords: Aging; Asset allocation; Life-cycle model; Medical expenditure; Saving