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Lifetime Earning and Heterogeneity in Retirement Wealth: the Role of Bequests, Minimum Consumption, and Social Security

  • Fang Yang

The data show large dispersion in household's wealth holding at retirement. In addition, the empirical correlation between household lifetime earnings and retirement wealth is much lower in the data than in many quantitative models. This paper quantifies and analyzes the implications of a life cycle model with intergenerational links (in the form of voluntary bequest motives and intergenerational transmission of ability) that also explicitly allows for defined benefit pensions, history-dependent social security, and a government-provided minimum consumption floor. The key finding is that this model goes a long way toward matching the observed wealth differences at retirement and their correlation with lifetime incomes.

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File URL: http://www.albany.edu/economics/research/workingp/2012/retirementWealth30.pdf
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Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 12-03.

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Date of creation: 2012
Date of revision:
Handle: RePEc:nya:albaec:12-03
Contact details of provider: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Phone: (518) 442-4735
Fax: (518) 442-4736

Order Information: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Web: http://www.albany.edu/economics/research/workingp/index.shtml Email:


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  1. Andrew A. Samwick, 1997. "Discount Rate Heterogeneity and Social Security Reform," NBER Working Papers 6219, National Bureau of Economic Research, Inc.
  2. William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers 624, UCLA Department of Economics.
  3. Steven F. Venti & David A. Wise, 2000. "Choice, Chance, and Wealth Dispersion at Retirement," NBER Working Papers 7521, National Bureau of Economic Research, Inc.
  4. Michael Hurd & James P. Smith, 2003. "Expected Bequests and Their Distribution," Working Papers 03-10, RAND Corporation Publications Department.
  5. Erik Hurst & Ming Ching Luoh & Frank P. Stafford, 1998. "The Wealth Dynamics of American Families, 1984-94," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 267-338.
  6. Yang, Fang, 2013. "Social security reform with impure intergenerational altruism," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 52-67.
  7. Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, 02.
  8. Jagadeesh Gokhale & Laurence J. Kotlikoff & James Sefton & Martin Weale, 1999. "Simulating the Transmission of Wealth Inequity via Bequests," NBER Working Papers 7183, National Bureau of Economic Research, Inc.
  9. John Bound & Charles Brown & Greg J. Duncan & Willard L Rodgers, 1989. "Measurement Error In Cross-Sectional and Longitudinal Labor Market Surveys: Results From Two Validation Studies," NBER Working Papers 2884, National Bureau of Economic Research, Inc.
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