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Saving and Life Insurance Holdings at Boston University – A Unique Case Study

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  • B. Douglas Bernheim
  • Solange Berstein

Abstract

This paper studies savings and life insurance adequacy using a financial planning software package, ESPlanner. This program computes the highest sustainable living standard for the household based on an elaborated life cycle planning model. ESPlanner was used in financial planning sessions with 386 Boston University employees. The sessions solicited highly detailed and very reliable information about respondents' financial circumstances and financial plans. The findings are striking. The correlation between ESPlanner's saving and insurance prescriptions and the actual decisions being made by BU employees is very weak in the case of saving and essentially zero in the case of life insurance. Many employees are spending far more and saving far less than they should, while others are under-spending and over-saving.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 161.

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Date of creation: Jun 2002
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Handle: RePEc:chb:bcchwp:161

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  1. Olivia S. Mitchell & James F. Moore, 1997. "Retirement Wealth Accumulation and Decumulation: New Developments and Outstanding Opportunities," Center for Financial Institutions Working Papers 97-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
  2. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
  3. Nelson, Julie A, 1992. "Methods of Estimating Household Equivalence Scales: An Empirical Investigation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(3), pages 295-310, September.
  4. Alan J. Auerbach & Laurence Kotlikoff, 1991. "Life Insurance Inadequacy - Evidence From a Sample of Older Widows," NBER Working Papers 3765, National Bureau of Economic Research, Inc.
  5. James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
  6. B. Douglas Bernheim & Katherine Grace Carman & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2002. "The mismatch between life insurance holdings and financial vulnerabilities: evidence from the Survey of Consumer Finances," Working Paper 0201, Federal Reserve Bank of Cleveland.
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Cited by:
  1. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," NBER Working Papers 12981, National Bureau of Economic Research, Inc.

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