Retirement flexibility is often seen as a hedge against macroeconomic risks such as capital market risks, which justifies more risky asset portfolios. This paper analyses the robustness of this claim in both a partial equilibrium and general equilibrium setting. We show that this positive relationship between risk taking and retirement flexibility is weakened and under some conditions even turned around if not only capital market risks, but also productivity risks are considered. Productivity risk in combination with a high elasticity of substitution between consumption and leisure creates a positive correlation between asset returns and labour income, reducing the willingness of consumers to bear risk.
