The Effects of Marital Status and Children on Savings and Portfolio Choice

Love, David A.

doi:10.1093/rfs/hhp020

Cited by 223 publications

(173 citation statements)

References 57 publications

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“…First, an extension to married households makes consumption and portfolio decisions depend on the health and survival of both partners (Lillard and Weiss, 1997;Jacobson, 2000;Love, 2010). Second, an extension to the working phase prior to retirement introduces an endogenous response of labor supply to health shocks as well as public and employerprovided health insurance (Blau and Gilleskie, 2008;French and Jones, 2011).…”

Section: Resultsmentioning

confidence: 99%

Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets

Yogo

2009

124

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In a life-cycle model, a retiree faces stochastic health depreciation and chooses consumption, health expenditure, and the allocation of wealth between bonds, stocks, and housing. The model explains key facts about asset allocation and health expenditure across health status and age. The portfolio share in stocks is low overall and is positively related to health, especially for younger retirees. The portfolio share in housing is negatively related to health for younger retirees and falls significantly in age. Finally, out-of-pocket health expenditure as a share of income is negatively related to health and rises in age.

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Section: Resultsmentioning

confidence: 99%

Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets

Yogo

2009

124

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“…5 Marital status and number of children were earlier included, motivated by Eckel and Grossman (2008) and more recently by Love (2010), and a dummy for tall individuals was earlier included, motivated by . The dummy variable Tall takes value one when the respondent is taller than an average woman or an average man in Finland.…”

Section: The Gender Effect In Portfolio Choicementioning

confidence: 99%

The gender effect in risky asset holdings

Halko

Kaustia

Alanko

2012

Journal of Economic Behavior & Organization

154

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“…We model housing costs ℎ as in Love (2010). Our "baseline" financial market parameterizations assume a risk-free interest rate of 1%, and an equity risk premium of 4% with a return volatility of 18%.…”

Section: 4)mentioning

confidence: 99%

“…The workhorse model of Cocco, Gomes, and Maenhout (2015) and was extended by Love (2010) and Hubener, Maurer and Mitchell (2016), who showed how family shocks due to changes in marital status and children alter optimal consumption, insurance, asset allocation, and retirement patterns. In Horneff, Maurer, Mitchell, and Rogalla (2015), we demonstrated how capital market surprises can influence saving and portfolio allocation patterns, and in Chai, Horneff, Maurer, and Mitchell (2011) we showed how flexible work patterns can help people hedge both earnings and capital market risk.…”

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confidence: 99%

How Persistent Low Expected Returns Alter Optimal Life Cycle Saving, Investment, and Retirement Behavior

Horneff¹,

Maurer²,

Mitchell³

2018

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This paper explores how a capital market environment of persistent low returns influences saving, investing, and retirement decisions and behaviors, as compared to what in the past had been thought of as more "normal" financial conditions. Our calibrated lifecycle dynamic model with realistic tax, minimum distribution, as well as uncertain income, stock returns, and mortality and Social Security benefit rules produces results that agree with observed work, and claiming age behavior of U.S. households.During the work life, the individual we consider has the opportunity to use current cash on hand for consumption and investments. Some portion of the worker's pre-tax salary (up to a limit of $18K) can be invested into a tax-qualified 401(k)-retirement plan of the EET type. That is, contributions into the account and investment earnings on account assets are tax-exempt, while withdrawals are taxed. In addition, a worker can invest outside his retirement plan in risky stocks and riskless bonds. The individual pays taxes (labor income tax, Medicare, City and State Tax, Social Security tax). Our model allows for flexible work effort and retirement ages. The worker can retire and claim Social Security benefits between age 62 and 70.The parameter of our model are matched, so that the model generates a large peak at the earliest claiming age at 62, as we can see in the data. Also in line with the empirical evidence, our baseline results show a smaller second peak at the (system-defined) Full Retirement Age of 66. Key Findings:The results of alternative interest rate regimes are also quite informative.• First, One sensible result is that people are predicted to save less during periods of low returns.• Second, people tend to finance consumption relatively early in retirement by drawing down their 401(k) assets sooner.• Third, low rates also change in which locations people save. During low-return periods, workers save less in tax-qualified accounts and more outside tax-qualified plans, until retirement. The reason is that the tax advantages of saving in 401(k) plans are relatively less attractive, inasmuch as the gain from saving in pretax plans is lower, and because the return on assets in the retirement account are lower in a low return environment.• And fourth, we find that low interest rates drive workers to claim Social Security benefits later, so they can take advantage of the relatively high payoff to deferring retirement under current rules. In this way we confirm that Social Security claiming rules have a powerful effect on how households are able to adjust to financial market fluctuations.Electronic copy available at: https://ssrn.com/abstract=3076397 AbstractThis Chapter explores how an environment of persistent low returns influences saving, investing, and retirement behaviors, as compared to what in the past had been thought of as more "normal" financial conditions. Our calibrated lifecycle dynamic model with realistic tax, minimum distribution, and Social Security benefit rules produces results that agree wi...

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The Effects of Marital Status and Children on Savings and Portfolio Choice

Cited by 223 publications

References 57 publications

Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets

Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets

The gender effect in risky asset holdings

How Persistent Low Expected Returns Alter Optimal Life Cycle Saving, Investment, and Retirement Behavior

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