This paper considers a pension insurance problem using an intertemporal framework. We assume a deterministic framework in order to obtain tractable and yet revealing results regarding the propensity to save for retirement. The essential conclusions of this paper include a condition for a single switch, that is, when the saver will decide the switching time, prior to retirement, to start saving. Because of the linear objective used in this paper, saving rates were found to be of the bang-bang type. In addition, we show that the tax effects are important. The richer the saver, the greater the tax advantages for pension savings. (JEL E20).
ASJC Scopus subject areas
- Economics and Econometrics
- Economics, Econometrics and Finance(all)