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Are All Americans Saving ‘Optimally’ for Retirement?

Author Info

  • John Karl Scholz

    (University of Wisconsin–Madison and NBER)

  • Ananth Seshadri

    (University of Wisconsin–Madison)

Abstract

Many people fear that Americans are preparing poorly for retirement. But developing rigorous evidence on this issue is difficult. In this paper we briefly discuss evidence on the adequacy of retirement wealth accumulation. We conclude that existing descriptive evidence does not seem consistent with dire assessments of poor financial preparation. We then extend the straightforward, but computationally complex dynamic programming approach used in our earlier work to assess the adequacy of retirement wealth preparation of Americans born before 1954. We find only 4 percent of HRS households have net worth below their optimal targets in 2004, though this percentage is somewhat higher for more recent HRS cohorts. While our work is preliminary, we find little evidence that Americans born before 1954 have prepared poorly for retirement.

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File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp189.pdf
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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp189.

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Length: ## pages
Date of creation: Sep 2008
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Handle: RePEc:mrr:papers:wp189
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  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. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 03-95, Wharton School Rodney L. White Center for Financial Research.
  3. repec:crr:issbrf:ib2007-7-11 is not listed on IDEAS
  4. Steven Haider & Gary Solon, 2000. "Non Random Selection in the HRS Social Security Earnings Sample," Working Papers 00-01, RAND Corporation Publications Department.
  5. Lazear, Edward P & Michael, Robert T, 1980. "Family Size and the Distribution of Real Per Capita Income," American Economic Review, American Economic Association, vol. 70(1), pages 91-107, March.
  6. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2004. "Are Americans Saving "Optimally" for Retirement?," NBER Working Papers 10260, National Bureau of Economic Research, Inc.
  7. Eric M. Engen & William G. Gale & Cori R. Uccello, 1999. "The Adequacy of Retirement Saving," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 65-188.
  8. William G. Gale & John Sabelhaus, 1999. "Perspectives on the Household Saving Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 181-224.
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Cited by:

  1. Maarten van Rooij & Annamaria Lusardi & Rob J. Alessie, 2011. "Financial Literacy, Retirement Planning, and Household Wealth," NBER Working Papers 17339, National Bureau of Economic Research, Inc.
  2. Tatom, John, 2010. "Financial wellbeing and some problems in assessing its link to financial education," MPRA Paper 26411, University Library of Munich, Germany.
  3. repec:dgr:uvatin:20120037 is not listed on IDEAS

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