The trajectory of wealth in retirement

Abstract

The Center for Retirement Research at Boston College, part of a consortium that includes parallel centers at the University of Michigan and the National Bureau of Economic Research, was established in 1998 through a grant from the Social Security Administration. The Center's mission is to produce first-class research and forge a strong link between the academic community and decision makers in the public and private sectors around an issue of critical importance to the nation's future. To achieve this mission, the Center sponsors a wide variety of research projects, transmits new findings to a broad audience, trains new scholars, and broadens access to valuable data sources.

How Portfolios Evolve after Retirement: Evidence from Australia

“…Standard life-cycle theory predicts that households will choose portfolios to cover both longevity risk and uninsurable consumption shocks (French et al, 2006), while drawing down their wealth judiciously over their remaining lifetime. However, panel studies of decumulation find unexpectedly low rates of drawdown, even after allowing for uninsured expenses, and puzzlingly low rates of insurance against longevity and other risks (B€ orsch-Supan, 2003;Love et al, 2009;Poterba et al, 2011Poterba et al, , 2013De Nardi et al, 2015). Our results largely support other Australian empirical studies showing that decumulation rates are cautious and that portfolio allocations change with age (Hulley et al, 2012;Wu et al, 2015).…”

YOLO: Mortality Beliefs and Household Finance Puzzles

“…For example, just 52% of households had assets in personal retirement accounts as of 2008(Poterba, Venti, and Wise (2011)), and there was a 4.3% annual increase in wealth among 70 to 75 year olds between 1998 and 2006, even after controlling for personal incomes(Love, Palumbo, and Smith (2009)). 5 The literature contains several compelling explanations for the drop in consumption at retirement, including the nonseparability between consumption and leisure, and home production (seeHurst (2008) for an overview).…”

Home Equity in Retirement

“…Hurd (1989) estimates the life-cycle model with mortality risk and bequest motives, and finds that intended bequests are small. Love et al (2009) analyze the retirement saving puzzle using "annualized comprehensive wealth," which is a measure of total wealth, including annuity-like assets as well as financial and nonfinancial assets. Hubbard et al (1995) argue that means-tested social insurance programs provide a virtual consumption floor and thus strong incentives for low-income individuals not to save; their paper can thus be seen as reinforcing the retirement saving puzzle.…”