Dr. Paul Kaplan
speaker
479 appearances
1 recordings
1 series
first heard Jul 2026
last heard 9 Jul
Dr. Paul Kaplan’s voice in public audio — every appearance, attributed to the second.
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Thank you.
Glad to be here.
Lifecycle finance is the branch of economics that deals with how individuals over the course of their entire lives should be making rational decisions regarding how much they consume year in and year out, how they save, how they invest, how they spend down their wealth, and how they should be smoothing their consumption over time.
so that when they go from their working years until their retirement years, there shouldn't be a big jump in their level of consumption.
It should be a smooth transition.
Life cycle model is a model that comes out of life cycle finance.
It's the actual models that people that work in this field develop.
Well, first, I think it's important to understand how our lifecycle model is similar to others.
We use the same basic framework that all lifecycle models are based on, which is the idea of optimization over a lifetime, or it's a maximum lifetime utility model.
And that the output of that model is basically consumption rules that come out, investments, savings during working years, growing down during retirement years.
It could also include the use of life insurance and annuities to deal with the uncertainty of a person's lifespan.
How does it differ?
It's in some of the details and also in the way that we have linked together life cycle finance, life cycle models.
we have linked it together with mean variance optimization models that came out of the work of Harry Markowitz.
Well, in order to understand that, we first have to go back and talk about the life cycle model in some detail.
Because in a life cycle model, there are a couple of key components.
One key component are the preferences components.
of the investor.
And we've identified three sets of preferences.
One is what I call intertemporal consumption preferences, which is what are the preferences of an investor over the course of their lifetime?
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