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Asset rundown after retirement: the importance of rate of return shocks

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Author Info

  • Olesya Baker
  • Phil Doctor
  • Eric French

Abstract

The authors provide evidence that households run down their assets after retirement by tracking a group of elderly households over the 1996–2004 period. They find that assets decline for these households approaching the end of the life cycle. Had there not been a run-up in asset prices due in large part to a historically remarkable rise in housing prices, assets would have declined even faster.

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File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2007/ep_2qtr2007_part3_french_doctor_baker.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

Volume (Year): (2007)
Issue (Month): Q II ()
Pages: 48-65

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Handle: RePEc:fip:fedhep:y:2007:i:qii:p:48-65:n:v.31no.2

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Related research

Keywords: Retirement ; Investments ; Business cycles;

References

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  1. Sabelhaus, John & Pence, Karen, 1999. "Household Saving in the '90s: Evidence from Cross-Section Wealth Surveys," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(4), pages 435-53, December.
  2. Karen E. Dynan & Dean M. Maki, 2001. "Does stock market wealth matter for consumption?," Finance and Economics Discussion Series 2001-23, Board of Governors of the Federal Reserve System (U.S.).
  3. Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," 2006 Meeting Papers 46, Society for Economic Dynamics.
  4. Jeffrey R. Brown & Amy Finkelstein, 2004. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," NBER Working Papers 10989, National Bureau of Economic Research, Inc.
  5. John H. Cochrane, 1997. "Where is the market going? Uncertain facts and novel theories," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 3-37.
  6. Palumbo, Michael G, 1999. "Uncertain Medical Expenses and Precautionary Saving Near the End of the Life Cycle," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 395-421, April.
  7. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675 Elsevier.
  8. Orazio P. Attanasio & Hilary W. Hoynes, 1995. "Differential Mortality and Wealth Accumulation," NBER Working Papers 5126, National Bureau of Economic Research, Inc.
  9. Feenberg, Daniel & Skinner, Jonathan, 1994. "The Risk and Duration of Catastrophic Health Care Expenditures," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 633-47, November.
  10. Margaret Hwang Smith & Gary Smith, 2006. "Bubble, Bubble, Where's the Housing Bubble?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 1-68.
  11. Eric French & Mariacristina De Nardi & John Bailey Jones & Olesya Baker & Phil Doctor, 2006. "Right before the end: asset decumulation at the end of life," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 2-13.
  12. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
  13. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
  14. Juster, F. Thomas & Smith, James P. & Stafford, Frank, 1999. "The measurement and structure of household wealth," Labour Economics, Elsevier, vol. 6(2), pages 253-275, June.
  15. Katharine Anderson & Eric French & Tina Lam, 2004. "You can't take it with you: asset run-down at the end of the life cycle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 40-54.
  16. Shorrocks, A F, 1975. "The Age-Wealth Relationship: A Cross-Section and Cohort Analysis," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 155-63, May.
  17. Ing-Haw Cheng & Eric French, 2000. "The effect of the run-up in the stock market on labor supply," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 48-65.
  18. James M. Poterba, 2001. "Demographic Structure And Asset Returns," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 565-584, November.
  19. Eric French & John Bailey Jones, 2004. "On the distribution and dynamics of health care costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 705-721.
  20. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-77, June.
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Cited by:
  1. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "The Drawdown of Personal Retirement Assets," NBER Working Papers 16675, National Bureau of Economic Research, Inc.

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