Economic Preparation for Retirement
In: Investigations in the Economics of Aging
We define and estimate measures of economic preparation for retirement based on a complete inventory of economic resources while taking into account the risk of living to advanced old age and the risk of high out-of-pocket spending for health care services. We ask whether, in a sample of 66-69 year-olds, observed economic resources could support with high probability a life-cycle consumption path anchored at the initial level of consumption until the end of life. We account for taxes, widowing, differential mortality and out-of-pocket health spending risk. We find that 71% of persons in our target age group are adequately prepared according to our definitions, but there is substantial variation by observable characteristics: 80% of married persons are adequately prepared compared with just 55% of single persons. We estimate that a reduction in Social Security benefits of 30 percent would reduce the fraction adequately prepared by 7.8 percentage points among married persons and by as much as 10.7 percentage points among single persons.
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- Michael D. Hurd & Susann Rohwedder, 2011.
"Economic Preparation for Retirement,"
in: Investigations in the Economics of Aging, pages 77-113
National Bureau of Economic Research, Inc.
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"Methodological Innovations in Collecting Spending Data: The HRS Consumption and Activities Mail Survey,"
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- Michael D. Hurd & Susann Rohwedder, 2008. "The Adequacy of Economic Resources in Retirement," Working Papers wp184, University of Michigan, Michigan Retirement Research Center.
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