The Trajectory of Wealth in Retirement

TitleThe Trajectory of Wealth in Retirement
Publication TypeReport
Year of Publication2008
AuthorsLove, DA, Palumbo, M, Smith, PA
InstitutionBoston College, Center for Retirement Research, WP 2008-7
Call Numbernewpubs20090908_CRR2008-7.pdf
KeywordsConsumption and Savings, Net Worth and Assets
Abstract

As the baby boomers begin to retire, a great deal remains unknown about the evolution of wealth toward the end of life. In this paper, we develop a new measure of household resources that converts total financial, nonfinancial, and annuitized assets into an expected annual amount of wealth per person. We use this measure, which we call annualized comprehensive wealth to investigate spend-down behavior among older households in the Health and Retirement Study. Our analysis indicates that, in (real) dollar terms, the median household's wealth declines more slowly than its remaining life expectancy, so that real annualized wealth actually tends to rise with age over retirement. Comparing the estimated age profiles for annualized wealth with profiles simulated from several different life cycle models, we find that a model that takes into account uncertain longevity, uncertain medical expenses, and (for higher-income retirees) intended bequests lines up best with the HRS data.

Endnote Keywords

Wealth Accumulation/Retirement Wealth/Consumption

Endnote ID

20550

Citation Key5716