Advanced Search
MyIDEAS: Login to save this paper or follow this series

Saving Before and After Retirement: A Study of Canadian Couples, 1969-1992

Contents:

Author Info

  • Xiaofen Lin
Registered author(s):

    Abstract

    This essay examines issues of life-cycle savings of Canadian elderly married-couple households just before and after retirement within both a pooled cross-sectional and a synthetic longitudinal framework. We investigate whether the saving behaviour of elderly couples appears to be motivated by life-cycle factors, how the growth of our economy has affected lifetime income, consumption and savings across generations, and, because we use repeated cross-sectional data, the 1969-1992 FAMEX, how to correct the age profiles distorted by the presence of differential mortality between the rich and the poor. We intend to provide evidence both for the empirical justification of the standard life-cycle model and for policy makers concerned with various social programs for the elderly in Canada. The pooled cross-section results on overall median age pattern indicate that, though income and consumption are both decreasing with age, the decrease in consumption is relatively smooth while income falls considerably at retirement age. Savings and saving rates thus exhibit a distinct pattern: they drop sharply at retirement age, but rise again thereafter. When households are grouped into four types according to retirement status of both spouses, it is clear that this saving dip is found only among both-retired couples. For couples with at least one spouse working, saving rates remain high throughout the age span. It is also found that controlling for income, households with both spouses retired have the highest saving rate among all types. In the cohort analysis, the age profiles show that income and consumption remain at about the same level or even increase with age after retirement. There are significant cohort effects in both income and consumption in that younger cohorts have higher income and higher consumption than older cohorts. Moreover, these effects are about the same for both variables. However, the age profile for the saving rate is very similar to those based on pooled cross-sections: a sharp drop at retirement, a quick rise thereafter. We find no cohort effects on saving rates in our sample. This is the core reason that saving profiles are the same in both cross-section and cohort analysis. Synthetic cohort analysis, however, is biased by the fact that the poorer tend to drop out from the sample earlier because of higher mortality. Based on the idea that decreasing quantiles with age should be used instead of the straight median for every age, a new method is developed to correct the median profiles for differential mortality. Two cases, the extreme case and the normal case, are illustrated in detail. Using population survival rates from the Canadian Life Table and the top 20% (in wealth distribution) survival rates from a Canadian study due to Wolfson, et al., we are able to estimate the varying quantiles and to correct the age profiles from the cohort studies. Differential mortality does make a difference in estimated lifetime behaviour. The corrected income profile is fairly constant after retirement. Consumption decreases throughout the age range. Saving rates now are lower and flatter after retirement. However, there is no sign of a further drop in saving rates after an initial drop at retirement age. If anything, we still see a tendency for the saving rates to rise after retirement.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://socserv.socsci.mcmaster.ca/iesop/papers/iesop_13.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by McMaster University in its series Independence and Economic Security of the Older Population Research Papers with number 13.

    as in new window
    Length: 103 pages
    Date of creation: Apr 1997
    Date of revision:
    Handle: RePEc:mcm:iesopp:13

    Contact details of provider:
    Postal: 1280 Main Street West, Hamilton, Ontario, L8S 4M4
    Phone: (905) 525-9140 ext. 22765
    Fax: (905) 521-8232
    Email:
    Web page: http://www.mcmaster.ca/economics/
    More information through EDIRC

    Related research

    Keywords: life-cycle; saving; income; retirement;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Frank T. Denton & Byron G. Spencer, 1999. "Population Aging and Its Costs: A Survey of the Issues and Evidence," Department of Economics Working Papers 1999-03, McMaster University.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:mcm:iesopp:13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.