You have just turned twenty-three years old, and are about to start working. Right now, you do not have any assets but have a student loan debt of $40,000. Your starting salary is w23 = $40,000 per year.

You expect your salary to grow at the rate of gw = 2% per year until you retire at age sixty-five. Suppose that you live until you are ninety years old. Your patience parameter gc is 1% p.a., while the valuation rate and the borrowing rate are v = 3% p.a. Suppose also that your current minimum, subsistent level of consumption is $15,000 per year, which is growing at the rate of gb = 2% per year. What are the optimal current discretionary consumption and savings levels?What is the fraction of your salary that you save?