Retirement flexibility and inability to borrow against future labor income can significantly
affect optimal consumption and investment. With voluntary retirement, there exists an optimal
wealth-to-wage ratio threshold for retirement and human capital correlates negatively with
the stock market even when wages have zero or slightly positive market risk exposure.
Consequently, investors optimally invest more in the stock market than without retirement
flexibility. Both consumption and portfolio choice jump at the endogenous retirement date …

Retirement flexibility and inability to borrow against future labor income can significantly
affect optimal consumption and investment. With voluntary retirement, there exists an optimal
wealth-towage ratio threshold for retirement and human capital correlates negatively with
the stock market even when wages have zero or slightly positive market risk exposure.
Consequently, investors optimally invest more in the stock market than without retirement
flexibility. Both consumption and portfolio choice jump at the endogenous retirement date …