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Effects of Stock Market Fluctuations on the Adequacy of Retirement Wealth Accumulation

Author Info

Listed author(s):
  • Eric M. Engen

    ()

    (American Enterprise Institute)

  • William G. Gale

    ()

    (The Brookings Institution)

  • Cori E. Uccello

    ()

    (Urban Institute)

Abstract

This paper examines the relation between fluctuations in the aggregate value of equities and the adequacy of households’ saving for retirement. We find that many and perhaps most households appear to be saving adequate amounts for retirement, but almost no link between stock values and the adequacy of retirement saving. Historical variation in equity values and ownership correlates poorly with historical variation in the adequacy of saving. Even a simulated 40 percent decline in stocks has little effect on the adequacy of saving. The results occur because equities are concentrated among households with significant amounts of other wealth.

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File URL: http://crr.bc.edu/working-papers/effects-of-stock-market-fluctuations-on-the-adequacy-of-retirement-wealth-accumulation/
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Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number 2004-16.

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Length: 37 pages
Date of creation: May 2004
Handle: RePEc:crr:crrwps:2004-16
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Keywords: retirement; saving; stocks; equities;

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Find related papers by JEL classification:
  • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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  1. Christopher D Carroll, 1997. "Why Do the Rich Save So Much?," Economics Working Paper Archive 388, The Johns Hopkins University,Department of Economics.
  2. A. L. Robb & J. B. Burbidge, 1989. "Consumption, Income, and Retirement," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 522-542, August.
  3. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-399, April.
  4. Olivia S. Mitchell & James Moore & John Phillips, "undated". "Explaining Retirement Saving Shortfalls," Pension Research Council Working Papers 98-13, Wharton School Pension Research Council, University of Pennsylvania.
  5. Robert B. Avery & Gregory E. Elliehausen, 1986. "Financial characteristics of high-income families," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages 163-177.
  6. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
  7. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
  8. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
  9. James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
  10. B. Douglas Bernheim & John Karl Scholz, 1993. "Private Saving and Public Policy," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 73-110 National Bureau of Economic Research, Inc.
  11. Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family finances in the U.S.: recent evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-24.
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Cited by:

  1. Love, David A. & Palumbo, Michael G. & Smith, Paul A., 2009. "The trajectory of wealth in retirement," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 191-208, February.
  2. James Banks & Rowena Crawford & Thomas Crossley & Carl Emmerson, 2012. "The effect of the financial crisis on older households in England," IFS Working Papers W12/09, Institute for Fiscal Studies.
  3. Courtney C. Coile & Phillip B. Levine, 2006. "Bulls, Bears, and Retirement Behavior," ILR Review, Cornell University, ILR School, vol. 59(3), pages 408-429, April.
  4. Davies, James B. & Yu, Xiaoyu, 2013. "Impacts of Cyclical Downturns on the Third Pillar of the RIS and Policy Responses," CLSSRN working papers clsrn_admin-2013-20, Vancouver School of Economics, revised 29 Apr 2013.

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