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Are You Sure You're Saving Enough for Retirement?

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Author Info
Jonathan Skinner

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Abstract

Many observers believe current aging baby boomers are woefully unprepared for retirement. Others raise the prospect that Americans are saving too much for retirement. This paper attempts to reconcile these contrasting views using a simple life cycle model and a more sophisticated retirement program, ESPlanner, with special reference to retirement prospects for economists. I find most households with post-graduate degrees fall short of the wealth needed to smooth spending through retirement. Of course, there are ways to economize during retirement: stepping up household production (cooking at home rather than eating out), selling one's house, or maintaining the modest individual consumption levels from when children still roamed the house. But ultimately, I argue these laudable strategies to reduce retirement expenses will be dwarfed by rapidly growing out-of-pocket medical expenses. The combination of eroding retiree health benefits and the risk of catastrophic future out-of-pocket health spending suggests that even conventional retirement planning recommendations could be too low.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12981.

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Date of creation: Mar 2007
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Handle: RePEc:nbr:nberwo:12981

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Find related papers by JEL classification:
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped

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    Other versions:
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