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How Seniors Change Their Asset Holdings During Retirement

  • Karen Smith
  • Mauricio Soto
  • Rudolph G. Penner

We use the 1998-2006 waves of the Health and Retirement Study (HRS) to investigate how households change their asset holdings at older ages. We find a notable increase in the net worth of older households between 1998 and 2006, with most of the growth due to housing. Our results indicate that, through 2006, older households did not spend all of their capital gains. This asset accumulation provides older households with a financial cushion for the turbulence experienced after 2007. The wealth distribution is highly skewed, and the age patterns of asset accumulation and decumulation vary considerably by income group. High-income seniors increase assets at older ages. Middle-income seniors reduce their assets in retirement, but at a rate that for most seniors will not deplete assets within their expected life. Many low-income seniors accumulate fewer assets and spend their financial assets at a rate that will mostly deplete them at older ages, leaving low-income seniors with only Social Security and DB pension income at older ages.

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File URL: http://crr.bc.edu/working-papers/how-seniors-change-their-asset-holdings-during-retirement/
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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 wp2009-31.

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Length: 53 pages
Date of creation: Dec 2009
Date of revision: Dec 2009
Handle: RePEc:crr:crrwps:wp2009-31
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  1. repec:crr:crrwps:2003-21 is not listed on IDEAS
  2. Richard W. Johnson & Gordon B.T. Mermin & Cori E. Uccello, 2006. "When The Nest Egg Cracks: Financial Consequences Of Health Problems, Marital Status Changes, And Job Layoffs At Older Ages," Working Papers, Center for Retirement Research at Boston College wp2005-18, Center for Retirement Research.
  3. David Love & Michael Palumbo & Paul Smith, 2008. "The Trajectory of Wealth in Retirement," Department of Economics Working Papers 2008-10, Department of Economics, Williams College.
  4. Alicia H. Munnell, 2003. "The Declining Role Of Social Security," Just the Facts jtf-6, Center for Retirement Research.
  5. Barbara A. Butrica & Howard M. Iams & Karen E. Smith & Eric J. Toder, 2009. "The Disappearing Defined Benefit Pension and its Potential Impact on the Retirement Incomes of Boomers," Working Papers, Center for Retirement Research at Boston College wp2009-2, Center for Retirement Research.
  6. Katharine Anderson & Eric French & Tina Lam, 2004. "You can't take it with you: asset run-down at the end of the life cycle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 40-54.
  7. Michael D. Hurd & Susann Rohwedder, 2008. "The Adequacy of Economic Resources in Retirement," Working Papers wp184, University of Michigan, Michigan Retirement Research Center.
  8. Robert Haveman & Karen Holden & Andrei Romanov & Barbara Wolfe, 2007. "Assessing the maintenance of savings sufficiency over the first decade of retirement," International Tax and Public Finance, Springer, vol. 14(4), pages 481-502, August.
  9. Robert Haveman & Karen Holden & Barbara Wolfe & Shane Sherlund, 2006. "Do Newly Retired Workers in the United States Have Sufficient Resources to Maintain Well-Being?," Economic Inquiry, Western Economic Association International, vol. 44(2), pages 249-264, April.
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