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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recordings per month · last 12 monthsRecordings per month over the last 12 months — 1 in all, peaking in Jul 2026 with 1.
Appearances
Why not have a flexible spending rule that's grounded in good theory instead of taking the risk of running out of money?
To get to an absolutely flat consumption like that, two things would have to be true.
Number one, the elasticity of intertemporal substitution, those consumption preference parameters, more importantly, would be the subjective discount rate.
If the subjective discount rate equaled the market rate of return, then regardless of the intertemporal elasticity of substitution, that would result in a flat consumption.
consumption rule.
The other condition, the person would have to take no certainty.
They would have to invest all their money in riskless assets.
But of course, the 4% rule is all about spending your money if you have risky assets.
So the conditions you need to get to that spending rule, you are completely at odds with the assumptions.
If you can annuitize, you get those mortality credits.
And also, it means you can plan on a smooth level of consumption that actually does not depend upon the possibility that you might not live to an old age.
So
You know, I was describing before, if you don't have annuities, your planned level of consumption might be, for age 110, it's probably going to be pretty small.
Whereas if you have annuities, your planned level of consumption at age 110 is just going to be on the same curve as your whole life.
So annuities allow you to create that smooth consumption pattern and don't have to worry about when you're going to die because it's all been baked into the annuity.
It should be an output, as we've been discussing here.
In a lifecycle model, any lifecycle model, consumption is the output.
Preferences are not the same thing.
I mean, the preferences of the inputs...
The consumption level is the output.
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