Economic Preparation for Retirement
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.
|Date of creation:||Jul 2011|
|Publication status:||published as Economic Preparation for Retirement , Michael D. Hurd, Susann Rohwedder. in Investigations in the Economics of Aging , Wise. 2012|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003.
"Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status,"
Journal of Econometrics,
Elsevier, vol. 112(1), pages 3-56, January.
- Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004. "Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status," NBER Chapters, in: Perspectives on the Economics of Aging, pages 415-526 National Bureau of Economic Research, Inc.
- Michael Hurd & Susann Rohwedder, 2009.
"Methodological Innovations in Collecting Spending Data: The HRS Consumption and Activities Mail Survey,"
Institute for Fiscal Studies, vol. 30(Special I), pages 435-459, December.
- Michael Hurd & Susann Rohwedder, 2008. "Methodological Innovations in Collecting Spending Data: The HRS Consumption and Activities Mail Survey," Working Papers 646, RAND Corporation.
- Hurd, Michael D. & Rohwedder, Susann, 2011.
"Economic Preparation for Retirement,"
872, RAND Corporation.
- Michael D. Hurd & Susann Rohwedder, 2013. "Wealth Dynamics and Active Saving at Older Ages," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 388-413 National Bureau of Economic Research, Inc.
- David A. Wise, 2004. "Introduction to "Perspectives on the Economics of Aging"," NBER Chapters, in: Perspectives on the Economics of Aging, pages 1-16 National Bureau of Economic Research, Inc.
- Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
- Michael D. Hurd & Susann Rohwedder, 2008. "The Adequacy of Economic Resources in Retirement," Working Papers wp184, University of Michigan, Michigan Retirement Research Center.
- Michael D. Hurd & Susann Rohwedder, 2009. "The Level and Risk of Out-of-Pocket Health Care Spending," Working Papers wp218, University of Michigan, Michigan Retirement Research Center.
- Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
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