Effects of Stock Market Fluctuations on the Adequacy of Retirement Wealth Accumulation

Engen, Eric M.; Gale, William G.; Uccello, Cori E.

doi:10.1111/j.1475-4991.2005.00160.x

Cited by 25 publications

(26 citation statements)

References 19 publications

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“…Engen, Gale, and Uccello (1999) Engen, Gale, and Uccello (1999), is still 72 percent, leading the authors to conclude that households are close to being adequately prepared for retirement. In an updated study, Engen, Gale, and Uccello (2002) found that the upswing in stock prices from 1995 to 1998 did not substantially alter their earlier findings on retirement income. This suggests that much of the increase in retirement wealth was concentrated among households who were already adequately prepared for retirement.…”

Section: Retirement Income Adequacymentioning

confidence: 74%

The Adequacy of Retirement Resources Among the Soon-to-Retire, 1983–2001

Wolff

2006

SSRN Journal

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A central issue confronting soon-to-retire workers (i.e., those aged 47-64) is whether they will have command over enough resources (both private and public) to maintain a decent standard of living in retirement. Typically, the adequacy of projected retirement income is judged in relation to some absolute standard (e.g., poverty threshold) and preretirement income ("replacement rate"). Using data from the Federal Reserve Board's Survey of Consumer Finances for 1983, 1989, and 2001, I find that expected retirement income grew robustly from 1989 to 2001 (by 38 percent in real terms) and the share with expected retirement income less than twice the poverty line fell by 5 percentage points. The percentage-point decline was even greater for minority households (11.6) and single females (5.7). The change in the share with replacement rates over 50 percent was 4.5 percentage points, though in this case much lower for minorities (0.9 percentage points) and single females (1.8 percentage points). However, percentage point changes for minorities and single females were much smaller, at 75 percent and a 100 percent replacement rates, respectively. Moreover, retirement wealth is very unevenly distributed. Whites and married couples had substantially larger wealth accumulations than their respective counterparts.JEL Classifications: J32, D31, H55

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Section: Retirement Income Adequacymentioning

confidence: 74%

The Adequacy of Retirement Resources Among the Soon-to-Retire, 1983–2001

Wolff

2006

SSRN Journal

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“…Engen, Gale and Uccello (2005) investigate the effects of stock market fluctuations on the adequacy of retirement wealth accumulation, and find that since those that do hold stocks are typically households with substantial wealth, fluctuations in stock market values can affect wealth without having much effect on households" ability to save for retirement. They simulate a stock market decline of 40% and find that this has a negligible impact on the share of households with inadequate wealth.…”

Section: Related Literaturementioning

confidence: 99%

The effect of the financial crisis on older households in England

Banks¹,

Crawford

Crossley³

et al. 2012

Working Paper Series

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may James Banks University of Manchester and IFS Rowena Crawford IFS Thomas Crossley Koç University, University of Cambridge and IFS and Carl Emmerson IFS October 2012Abstract: Prices of real and financial assets fell substantially in the UK during 2008-09. The fourth wave of the English Longitudinal Study of Ageing (ELSA) was in the field throughout this "financial crisis". We use these data and earlier ELSA waves first to document the effect of the crisis on the finances of those aged 50 and over in England, and second, to estimate the effect of wealth shocks on household consumption and individual expectations of the future. Many households experienced a significant wealth shock, but these shocks led to modest spending effects and small revisions to expectations regarding future bequests. Expectations of bequests seem particularly tied to housing wealth. JEL codes: D12, D14, E21, G01, G11

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“…In addition to the replacement-rate approach, the literature inlcudes a collection of papers comparing wealth patterns in the data with optimal accumulation patterns from a stochastic life cycle model (see Engen, Gale, andUccello, 1999, 2005;Scholz, Seshadri, and Khitatrakun, 2006). The advantage of this method is that it derives from theoretical principles: working households save the amount necessary to provide the maximum level of smoothed consumption over their expected lifetimes.…”

Section: Previous Notions Of Adequacymentioning

confidence: 99%

“…4 See Bernheim (1992); Munnell and Soto (2005); Mitchell and Moore (1998); Moore and Mitchell (2000). 5 See Engen, Gale, andUccello (1999, 2005); Scholz, Seshadri, and Khitatrakun (2006); Brady (2006). 6 Earlier studies have included estimates of DB and Social Security wealth, but not annuities, life insurance, welfare or future wages.…”

Section: Introductionmentioning

confidence: 99%

Do Households Have Enough Wealth for Retirement?

2007

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Dramatic structural changes in the U.S. pension system, along with the impending wave of retiring baby boomers, have given rise to a broad policy discussion of the adequacy of household retirement wealth. We construct a uniquely comprehensive measure of wealth for households aged 51 and older in 2004 that includes expected wealth from Social Security, defined benefit pensions, life insurance, annuities, welfare payments, and future labor earnings. Abstracting from the uncertainty surrounding asset returns, length of life and medical expenses, we assess the adequacy of wealth using two expected values: an annuitized value of comprehensive wealth and the ratio of comprehensive wealth to the actuarial present value of future poverty lines. We find that most households in these older cohorts can expect to have sufficient total resources to finance adequate consumption throughout retirement, taking as given expected lifetimes and current Social Security benefits. We find a median annuity value of wealth equal to $32,000 per person per year in expected value and a median ratio of comprehensive wealth to poverty-line wealth of 3.56. About 12 percent of households, however, do not have sufficient wealth to finance consumption equal to the poverty line over their expected lifetimes, even after including the value of Social Security and welfare benefits, and an additional 9 percent can expect to be relatively close to the poverty line. *

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Effects of Stock Market Fluctuations on the Adequacy of Retirement Wealth Accumulation

Cited by 25 publications

References 19 publications

The Adequacy of Retirement Resources Among the Soon-to-Retire, 1983–2001

The Adequacy of Retirement Resources Among the Soon-to-Retire, 1983–2001

The effect of the financial crisis on older households in England

Do Households Have Enough Wealth for Retirement?

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