The Adequacy of Household Saving

TitleThe Adequacy of Household Saving
Publication TypeJournal Article
Year of Publication1999
AuthorsEngen, EM, Gale, WG, Uccello, CE
JournalBrookings Papers on Economic Activity
Volume2
Pagination65-165
Call Numberpubs_1999_Engen_etal.pdf
KeywordsAdult children, Consumption and Savings, Event History/Life Cycle, Income, Net Worth and Assets, Retirement Planning and Satisfaction
Abstract

This paper shows that, in a life-cycle simulation model in which people save for retirement and due to uncertain future earnings and lifespan, there will be a distribution of optimal wealth-earnings ratios, even among observationally equivalent households. Therefore even low levels of wealth can be consistent with optimization. Using HRS and SCF data, we find that more than half of married households where the husband works full-time have wealth -earnings ratios exceeding the optimal median simulated ratio for households with the same characteristics. The model understates accumulation among households with high wealth-earnings ratios. Both results suggest accumulation is adequate for most such households. However, there is evidence of undersaving at the 5th and the 25th percentiles. We also reconcile most previous studies that have been interpreted as showing inadequate household saving with our results.

Notes

RDA 1998-006

URLhttp://www.brookings.org/es/commentary/journals/bpea_macro/bpea_macro .htm
Endnote Keywords

Consumer Economics: Empirical Analysis/Consumer Economics: Empirical Analysis/Macroeconomics: Consumption/Saving/Retirement/Retirement Policies/Personal Income and Wealth Distribution/Distribution/Households/Life Cycle/Retirement/Saving/Wealth

Endnote ID

1046

Citation Key6632