Health, Education, and the Post-Retirement Evolution of Household Assets

TitleHealth, Education, and the Post-Retirement Evolution of Household Assets
Publication TypeReport
Year of Publication2013
AuthorsPoterba, JM, Venti, SF, Wise, DA
InstitutionCambridge, MA, National Bureau of Economic Research
KeywordsDemographics, Health Conditions and Status, Net Worth and Assets, Retirement Planning and Satisfaction

This paper explores the relationship between education and the evolution of wealth after retirement. Asset growth following retirement depends in part on health capital and financial capital accumulated prior to retirement, which in turn are strongly related to educational attainment. These initial conditions for retirement can have a lingering effect on subsequent asset evolution. Our aim is to disentangle the effects of education on post-retirement asset evolution that operate through health and financial capital accumulated prior to retirement from the effects of education that impinge directly on asset evolution after retirement. We consider the indirect effect of education through financial resources in particular Social Security benefits and defined benefit pension benefits and through health capital that was accumulated before retirement. We also consider the direct effect of education on asset growth following retirement, emphasizing the correlation between education and the returns households earn on their post-retirement investments. Households with different levels of education invest, on average, in different assets, and they may consequently earn different rates of return. Finally, we consider the additional effects of education that are not captured through these pathways. Our empirical findings suggest a substantial association between education and the evolution of assets. For example, for two person households the growth of assets between 1998 and 2008 is on average much greater for college graduates than for those with less than a high school degree. This difference ranges from about 82,000 in the lowest asset quintile to over 600,000 in the highest.

Endnote Keywords

education/wealth/asset accumulation/household finances/retirement planning/health capital/health capital

Endnote ID


Citation Key5964