Optimal Consumption, Portfolio, and Retirement Under Implementation Delay

We develop a continuous-time model of optimal consumption, portfolio allocation, and early retirement that, to our knowledge, is the first to incorporate an implementation delay —a fixed lag (Formula presented.) between the retirement decision and the actual cessation of labor and income. Using a dual-martingale approach, we obtain closed-form solutions and quantify how (Formula presented.) affects optimal behavior. For example, when (Formula presented.) increases from (Formula presented.) to 2 years (baseline parameters: (Formula presented.), (Formula presented.), (Formula presented.), (Formula presented.), (Formula presented.), (Formula presented.), and (Formula presented.)), optimal pre-retirement consumption rises by approximately 7%, the risky asset share falls by about 5 percentage points, the expected retirement time increases by over 1 year, and the retirement wealth threshold (Formula presented.) grows by roughly 10%. These results provide policy-relevant insights for retirement systems where procedural lags can distort incentives and reduce welfare.