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Right before the end: asset decumulation at the end of life

Author

Listed:
  • Eric French
  • Mariacristina De Nardi
  • John Bailey Jones
  • Olesya Baker
  • Phil Doctor

Abstract

Using data from the Asset and Health Dynamics of the Oldest Old survey, the authors find that the assets of people who die decline much faster than the assets of people who survive, even after controlling for age, sex, and initial asset levels. Out-of-pocket medical expenses right before death can deplete the assets of many elderly households and constitute an important reason to keep assets in old age.

Suggested Citation

  • Eric French & Mariacristina De Nardi & John Bailey Jones & Olesya Baker & Phil Doctor, 2006. "Right before the end: asset decumulation at the end of life," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 2-13.
  • Handle: RePEc:fip:fedhep:y:2006:i:qiii:p:2-13:n:v.30no.3
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    References listed on IDEAS

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    1. Michael D. Hurd & James P. Smith, 2001. "Anticipated and Actual Bequests," NBER Chapters,in: Themes in the Economics of Aging, pages 357-392 National Bureau of Economic Research, Inc.
    2. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, with and without Liquidity Constraints," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 23-45, Summer.
    3. Orazio P. Attanasio & Hilary Williamson Hoynes, 2000. "Differential Mortality and Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 1-29.
    4. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675 Elsevier.
    5. Wojciech Kopczuk, 2007. "Bequest and Tax Planning: Evidence from Estate Tax Returns," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1801-1854.
    6. Mariacristina De Nardi & Eric French & John Bailey Jones, 2005. "Differential mortality, uncertain medical expenses, and the saving of elderly singles," Working Paper Series WP-05-13, Federal Reserve Bank of Chicago.
    7. Orazio P. Attanasio & Carl Emmerson, 2003. "Mortality, Health Status, and Wealth," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 821-850, June.
    8. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 3-22, Summer.
    9. Eric French & Kirti Kamboj, 2002. "Analyzing the relationship between health insurance, health costs, and health care utilization," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 60-72.
    10. Shorrocks, A F, 1975. "The Age-Wealth Relationship: A Cross-Section and Cohort Analysis," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 155-163, May.
    11. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
    12. Eric French & John Bailey Jones, 2004. "On the distribution and dynamics of health care costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 705-721.
    13. Juster, F. Thomas & Smith, James P. & Stafford, Frank, 1999. "The measurement and structure of household wealth," Labour Economics, Elsevier, vol. 6(2), pages 253-275, June.
    14. Michael G. Palumbo, 1999. "Uncertain Medical Expenses and Precautionary Saving Near the End of the Life Cycle," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 395-421.
    15. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
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    Citations

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    Cited by:

    1. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Savings After Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 177-204, October.
    2. Margherita Borella & Mariacristina De Nardi & Eric French, 2016. "Who Receives Medicaid in Old Age? Rules and Reality," NBER Working Papers 21873, National Bureau of Economic Research, Inc.
    3. Yoko Niimi & Charles Yuji Horioka, 2018. "The Wealth Decumulation Behavior of the Retired Elderly in Japan: The Relative Importance of Precautionary Saving and Bequest Motives," ISER Discussion Paper 1042, Institute of Social and Economic Research, Osaka University.
    4. repec:eee:hapoch:v1_237 is not listed on IDEAS
    5. De Nardi, Mariacristina & Yang, Fang, 2016. "Wealth inequality, family background, and estate taxation," Journal of Monetary Economics, Elsevier, vol. 77(C), pages 130-145.
    6. Alexandra Spicer & Olena Stavrunova & Susan Thorp, 2016. "How Portfolios Evolve after Retirement: Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 92(297), pages 241-267, June.
    7. James M. Poterba & Steven F. Venti & David A. Wise, 2015. "What Determines End-of-Life Assets? A Retrospective View," NBER Chapters,in: Insights in the Economics of Aging, pages 127-157 National Bureau of Economic Research, Inc.
    8. Moore, Rachel & Pecoraro, Brandon, 2018. "Macroeconomic Implications of Modeling the Internal Revenue Code in a Heterogeneous-Agent Framework," MPRA Paper 87240, University Library of Munich, Germany.
    9. Olesya Baker & Phil Doctor & Eric French, 2007. "Asset rundown after retirement: the importance of rate of return shocks," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 48-65.
    10. Fang, H., 2016. "Insurance Markets for the Elderly," Handbook of the Economics of Population Aging, Elsevier.
    11. Mariacristina De Nardi & Eric French & John Bailey Jones, 2015. "Couples' and Singles’ Savings After Retirement," Working Papers wp322, University of Michigan, Michigan Retirement Research Center.

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    Keywords

    Wealth ; Households - Economic aspects;

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