Saving Preferences After Retirement

Abstract

Using an online experimental survey, we investigate the importance of rational and psychological motives for saving in retirement for soon to be retired individuals. Our experimental task uses vignettes to elicit the impact of alternative retirement income policy settings comprising combinations of regular income and wealth, and major life events such as becoming frail and/or losing a spouse. Findings indicate that people modify their savings motives where a major life event is expected and the precautionary health savings motive becomes more important if the health of a spouse is expected to deteriorate in the near future. Our experimental survey is fielded in the Netherlands and Australia to allow investigation of the importance of the prevailing institutional settings (annuitized pension wealth in the Netherlands versus flexible drawdowns in Australia). Findings suggest that norms and awareness of the potential risks faced in the actual institutional setting are more important for the ranking of savings motives than the experimental institutional setting for the retirement income provision (income through full annuitization versus flexible withdrawal). This suggests that retirees may be slow to adjust their saving motives and spending patterns following an actual policy shift from flexible drawdowns to annuitization or vice versa.

Stochastic modelling of the home equity access scheme

“…We also consider the expected present value (EPV) of the future bequest for each strategy. Bequest remains a significant concern for many retirees, is an important component of intergenerational equity transfer (Alonso-Garcia et al, 2018; Haurin and Moulton, 2017; Olsberg and Winters, 2005), and may partly explain aversion to products such as lifetime annuities (O’Meara et al, 2015). Within our framework, the ability to bequest can be considered a component of flexibility or a component of income.…”

Spending from Regulated Retirement Drawdowns: The Role of Implied Endorsement*

“…The full set of vignettes, except for the regulated drawdown vignette, are analysed in a companion paper byAlonso-García et al (2018).…”