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Retirement Date Effects on Pre-Retirement Wealth Accumulation: An Analysis of US Households

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  • Aylit Tina Romm
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    Abstract

    This paper uses seven waves of data from the US Health and Retirement Study to investigate the impact of expectations regarding the timing of retirement on pre-retirement wealth accumulation. More specifically, we analyze the effect of the individual's subjective belief that he will work full time after age 62 on his current level of wealth. We use the individual's perception of the usual retirement age on the job as an instrument for his subjective belief that he will work full time after age 62. We look at single women, single men and married individuals separately. On a whole, the point estimates suggest that the responsiveness of individuals saving behaviour to retirement dates expectations is large. A ten percent-age point increase in the subjective probability of working past age 62 results in a decrease in household wealth well in excess of 20% for most demographic groups. In addition, we find that, in the case of married couples in particular, there is a threshold effect in this response

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    Bibliographic Info

    Paper provided by Economic Research Southern Africa in its series Working Papers with number 266.

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    Length: 33 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:rza:wpaper:266

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    Keywords: Retirement timing; Subjective beliefs; Wealth;

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    1. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
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    13. Michael D. Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities in Retirement," Working Papers wp096, University of Michigan, Michigan Retirement Research Center.
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    17. Ahmed Khwaja & Frank Sloan & Sukyung Chung, 2007. "The relationship between individual expectations and behaviors: Mortality expectations and smoking decisions," Journal of Risk and Uncertainty, Springer, vol. 35(2), pages 179-201, October.
    18. King, M A & Dicks-Mireaux, L-D L, 1982. "Asset Holdings and the Life-Cycle," Economic Journal, Royal Economic Society, vol. 92(366), pages 247-67, June.
    19. Michael D. Hurd & Kathleen McGarry, 1993. "Evaluation of Subjective Probability Distributions in the HRS," NBER Working Papers 4560, National Bureau of Economic Research, Inc.
    20. Michael Hurd & Kathleen McGarry, 1993. "The Relationship Between Job Characteristics and Retirement," NBER Working Papers 4558, National Bureau of Economic Research, Inc.
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