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Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets

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  • James M. Poterba
  • Steven F. Venti
  • David A. Wise

Abstract

We consider the evolution of assets after retirement. We ask whether total assets--including housing equity, personal retirement accounts, and other financial assets--tend to be husbanded for a rainy day and drawn down primarily at the time of precipitating shocks, or whether they are drawn down throughout the retirement period. We focus on the relationships between family status transitions, “latent” health status, and the evolution of assets. Our analysis is based primarily on longitudinal data from the HRS and AHEAD cohorts of the Health and Retirement Study. We find that the evolution of assets is strongly related to family status transitions. For both single individuals and married couples who do not experience a death or divorce, total assets increase well into old age. In contrast, individuals in married couples that experience a family status transition, either a death or a divorce, exhibit much slower asset growth and often experience a large decline in asset values at the time of the transition. In addition, the level and evolution of assets is very strongly related to health, measured by a latent health index. For example, for continuing two-person HRS households between the ages of 56 and 61 in 1992 the ratio of assets of households in the top health quintile to the assets of those in the bottom quintile was 1.7 in 1992. It had increased to 2.2 by the end of 2006.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15789.

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Date of creation: Feb 2010
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Publication status: published as Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets , James M. Poterba, Steven F. Venti, David A. Wise. in Explorations in the Economics of Aging , Wise. 2011
Handle: RePEc:nbr:nberwo:15789

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  1. James Banks & Richard Blundell & Zoë Oldfield & James P. Smith, 2007. "Housing Price Volatility and Downsizing in Later Life," NBER Working Papers 13496, National Bureau of Economic Research, Inc.
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Cited by:
  1. Poterba, James M. & Venti, Steven F. & Wise, David A., 2011. "The Asset Cost of Poor Health," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp11-005, Harvard University, John F. Kennedy School of Government.
  2. SHIMIZUTANI Satoshi & FUJII Mayu & OSHIO Takashi, 2012. "Option Value of Work, Health Status, and Retirement Decisions: New evidence from the Japanese Study on Aging and Retirement (JSTAR)," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 12050, Research Institute of Economy, Trade and Industry (RIETI).
  3. James M. Poterba & Steven F. Venti & David A. Wise, 2012. "Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts," NBER Working Papers 17824, National Bureau of Economic Research, Inc.
  4. FUJII Mayu & OSHIO Takashi & SHIMIZUTANI Satoshi, 2012. "Self-Rated Health Status of the Japanese and Europeans in Later Life: Evidence from JSTAR and SHARE," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 12061, Research Institute of Economy, Trade and Industry (RIETI).
  5. James Poterba & Steven Venti & David A. Wise, 2013. "Health, Education, and the Postretirement Evolution of Household Assets," Journal of Human Capital, University of Chicago Press, University of Chicago Press, vol. 7(4), pages 297 - 339.
  6. 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.
  7. Satoshi Shimizutani & Takashi Oshio & Mayu Fujii, 2014. "Option Value of Work, Health Status, and Retirement Decisions in Japan: Evidence from the Japanese Study on Aging and Retirement (JSTAR)," NBER Working Papers 20001, National Bureau of Economic Research, Inc.
  8. Gustman, Alan L. & Steinmeier, Thomas L., 2012. "Policy effects in hyperbolic vs. exponential models of consumption and retirement," Journal of Public Economics, Elsevier, Elsevier, vol. 96(5), pages 465-473.
  9. Geoffrey L. Wallace & Robert Haveman & Karen Holden & Barbara Wolfe, 2012. "Health and Wealth in Early Retirement," CEPR Discussion Papers, Centre for Economic Policy Research, Research School of Economics, Australian National University 669, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  10. Agar Brugiavini & Franco Peracchi, 2014. "Health Status, Disability Insurance and Incentives to Exit the Labor Force in Italy: Evidence from SHARE," NBER Chapters, National Bureau of Economic Research, Inc, in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement National Bureau of Economic Research, Inc.

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