Health Status, Health Shocks, and Asset Adequacy Over Retirement Years.

TitleHealth Status, Health Shocks, and Asset Adequacy Over Retirement Years.
Publication TypeJournal Article
Year of Publication2017
AuthorsWallace, GL, Haveman, R, Wolfe, B
JournalResearch on Aging
Date Published2017 Jan
ISSN Number1552-7573
KeywordsHealth Conditions and Status, Health Shocks, Older Adults, Retirement Planning and Satisfaction

This article uses data on a sample of retirees drawn from the Health and Retirement Study (HRS) to examine changes in health over the retirement years and to estimate the effects of health changes in retirement on wealth. Using the framework of item response theory, we develop a novel measure of health that makes use of multiple indicators of physical health that are available in the HRS. We find that large negative shocks to the health of male retirees and their spouses are frequent in retirement and that when such shocks do occur, recovery to the preshock level of health is rare. Using a dynamic panel data model, we then estimate short- and long-run effects of changes in health on wealth. While our estimated short-run effects are modest, long-run estimates of the impact of health shocks on wealth are large, ranging from a 12% to 20% reduction in wealth by the 10th year, following a permanent one standard deviation decrease in health.

Alternate JournalRes Aging
Citation Key8896
PubMed ID28181872
PubMed Central IDPMC6714570
Grant ListP30 AG017266 / AG / NIA NIH HHS / United States