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The Composition and Drawdown of Wealth in Retirement

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  • James Poterba
  • Steven Venti
  • David Wise

Abstract

This paper presents evidence on the resources available to households as they enter retirement. It draws heavily on data collected by the Health and Retirement Study. We calculate the "potential additional annuity income" that households could purchase, given their holdings of non-annuitized financial assets at the start of retirement. We also consider the role of housing equity in the portfolios of retirement-age households and explore the extent to which households draw down housing equity and financial assets as they age. Because home equity is often conserved until very late in life, for many households it may provide some insurance against the risk of living longer than expected. Finally, we consider how our findings bear on a number of policy issues, such as the role for annuity defaults in retirement saving plans.

Suggested Citation

  • James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
    • Handle: RePEc:aea:jecper:v:25:y:2011:i:4:p:95-118
    Note: DOI: 10.1257/jep.25.4.95
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.25.4.95
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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