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Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets

  • James M. Poterba
  • Steven F. Venti
  • David A. Wise

We consider the evolution of assets after retirement. We ask whether total assets--including housing equity, personal retirement accounts, and other financial assets--tend to be husbanded for a rainy day and drawn down primarily at the time of precipitating shocks, or whether they are drawn down throughout the retirement period. We focus on the relationships between family status transitions, "latent" health status, and the evolution of assets. Our analysis is based primarily on longitudinal data from the HRS and AHEAD cohorts of the Health and Retirement Study. We find that the evolution of assets is strongly related to family status transitions. For both single individuals and married couples who do not experience a death or divorce, total assets increase well into old age. In contrast, individuals in married couples that experience a family status transition, either a death or a divorce, exhibit much slower asset growth and often experience a large decline in asset values at the time of the transition. In addition, the level and evolution of assets is very strongly related to health, measured by a latent health index. For example, for continuing two-person HRS households between the ages of 56 and 61 in 1992 the ratio of assets of households in the top health quintile to the assets of those in the bottom quintile was 1.7 in 1992. It had increased to 2.2 by the end of 2006.

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File URL: http://www.nber.org/papers/w15789.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15789.

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Date of creation: Feb 2010
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Publication status: published as Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets , James M. Poterba, Steven F. Venti, David A. Wise. in Explorations in the Economics of Aging , Wise. 2011
Handle: RePEc:nbr:nberwo:15789
Note: AG
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  1. Courtney Coile & Kevin Milligan, 2009. "How Household Portfolios Evolve After Retirement: The Effect Of Aging And Health Shocks," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 226-248, 06.
  2. James Banks & Richard Blundell & Zoë Oldfield & James P. Smith, 2007. "Housing Price Volatility and Downsizing in Later Life," NBER Working Papers 13496, National Bureau of Economic Research, Inc.
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