@article {9017, title = {The Long Reach of Education: Health, Wealth, and DI Participation}, number = {Working Paper No. 23307}, year = {2017}, month = {04/2017}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {Education is strongly related to participation in the Social Security Disability Insurance (DI) program. To explore this relationship, we describe the correlation between education and DI participation, and then explore how four factors related to education - health, wealth, occupation, and employment - feature in this correlation. We label these four factors {\textquotedblleft}pathway{\textquotedblright} variables. We find that a large component of the relationship between education and DI participation - more than one-third for men, and over two-thirds for women - can be attributed to the correlation of education with health, and of health with DI receipt. We use data from the Health and Retirement Study for the 1992-2012 period to explore the corresponding roles for each of the pathway variables, and also to study how changes over time in these variables, such as the widening gap between the health status of those with high and low educational attainment, have affected DI participation.}, keywords = {Education, Health Conditions and Status, Older Adults, Wealth}, doi = {10.3386/w23307}, url = {http://www.nber.org/papers/w23307.pdf}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {9333, title = {Longitudinal Determinants of End-of-Life Wealth Inequality}, number = {Working Paper No. 23839}, year = {2017}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {This paper examines inequality in end-of-life wealth and the factors that contribute to individuals reaching this life stage with few financial resources. It analyzes repeated cross-sections of the Health and Retirement Study, as well as a small longitudinal sample of individuals observed both at age 65 and shortly before death. Most of those who die with little wealth had little wealth at retirement. There is strong persistence over time in the bottom tail of the wealth distribution, but the probability of having low wealth increases slowly with age after age 65. Those with low lifetime earnings are much more likely to report low wealth at retirement, and to die with little wealth, than their higher-earning contemporaries. The onset of a major medical condition and the loss of a spouse increase in the probability of falling into the low wealth category at advanced ages, although these factors appear to contribute to wealth decline for only a small fraction of those who had modest wealth at age 65 but low wealth at the time of death.}, keywords = {Income inequality, Inequality, Retirement Planning and Satisfaction}, doi = {10.3386/w23839}, url = {http://www.nber.org/papers/w23839.pdf}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {VENTI2015133, title = {The long reach of education: Early retirement}, journal = {The Journal of the Economics of Ageing}, volume = {6}, year = {2015}, pages = {133 - 148}, abstract = {The goal of this paper is to draw attention to the long lasting effect of education on economic outcomes. We use the relationship between education and two routes to early retirement {\textendash} the receipt of Social Security Disability Insurance (DI) and the early claiming of Social Security retirement benefits {\textendash} to illustrate the long-lasting influence of education. We find that for both men and women with less than a high school degree the median DI participation rate is 6.6 times the participation rate for those with a college degree or more. Similarly, men and women with less than a high school education are over 25 percentage points more likely to claim Social Security benefits early than those with a college degree or more. We focus on four critical {\textquotedblleft}pathways{\textquotedblright} through which education may indirectly influence early retirement {\textendash} health, employment, earnings, and the accumulation of assets. We find that for women health is the dominant pathway through which education influences DI participation. For men, the health, earnings, and wealth pathways are of roughly equal magnitude. For both men and women the principal channel through which education influences early Social Security claiming decisions is the earnings pathway. We also consider the direct effect of education that does not operate through these pathways. The direct effect of education is much greater for early claiming of Social Security benefits than for DI participation, accounting for 72\% of the effect of education for men and 67\% for women. For women the direct effect of education on DI participation is not statistically significant, suggesting that the total effect may be through the four pathways.}, keywords = {disability insurance, Education, Retirement, Social Security}, issn = {2212-828X}, doi = {https://doi.org/10.1016/j.jeoa.2015.08.001}, url = {http://www.sciencedirect.com/science/article/pii/S2212828X15000201}, author = {Steven F Venti and David A Wise} } @article {5867, title = {What Determines End-of-Life Assets? A Retrospective View}, year = {2015}, abstract = {We consider assets when individuals were last observed prior to death in the Health and Retirement Study (HRS) and trace assets backwards to the age when these individuals were first observed. For most individuals, assets in the last year observed (LYO) were very similar to assets in the first year observed (FYO). In particular, most of those who were last observed with very low asset levels also had low assets when first observed. We also estimate the relationship between an individual{\textquoteright}s asset change between the first and last date of observation, that individual{\textquoteright}s education and health status when first observed, and that individual{\textquoteright}s within-sample changes in health and family composition. We obtain estimates for HRS respondents who were 51 to 61 in 1992 and for AHEAD respondents who were age 70 and over in 1993.}, keywords = {Consumption and Savings, Employment and Labor Force, Net Worth and Assets, Women and Minorities}, author = {James M. Poterba and Steven F Venti and David A Wise} } @inbook {NBERc12964, title = {The Nexus of Social Security Benefits, Health, and Wealth at Death}, booktitle = {Discoveries in the Economics of Aging}, year = {2014}, pages = {159-182}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, abstract = {Social Security (SS) benefits are the most important component of the income of a large fraction of older Americans. A significant fraction approach later life relying heavily on SS benefits. Persons in poor health in old age have a higher-than-average probability of having experienced low earnings while in the labor force, increasing the risk of having low SS benefits in retirement. While the progressivity of the SS benefit formula provides a safety net to support low-wage workers in retirement, a noticeable fraction still have income below the poverty level in their last years. In general, low assets and low income in old age are strongly related to poor health. We explore this nexus and describe the relationship between SS benefits and the exhaustion of non-annuity assets near the end of life. We examine the relationship between the drawdown of assets between the first year an individual is observed in the AHEAD data (1995) and the last year that individual is observed before death, and that individual{\textquoteright}s health, SS benefits, and other annuity benefits. SS and defined benefit pension benefits are strongly "protective" of non-annuity assets, with a negative relationship between these income flows and the likelihood of exhausting non-annuity assets.}, keywords = {health, Social Security Benefits, Wealth}, url = {http://www.nber.org/chapters/c12964}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {5964, title = {Health, Education, and the Post-Retirement Evolution of Household Assets}, year = {2013}, institution = {Cambridge, MA, National Bureau of Economic Research}, abstract = {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.}, keywords = {Demographics, Health Conditions and Status, Net Worth and Assets, Retirement Planning and Satisfaction}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {5925, title = {Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts}, year = {2012}, note = {National Bureau of Economic Research, Inc, NBER Working Papers: 17824, 2012 0898-2937 Working Paper}, institution = {National Bureau of Economic Research}, abstract = {Many analysts have considered whether households approaching retirement age have accumulated enough assets to be well prepared for retirement. In this paper, we shift from studying household finances at the start of the retirement period, an ex ante measure of retirement preparation, to studying the asset holdings of households in their last years of life. The analysis is based on Health and Retirement Study with special attention to Asset and Health Dynamics Among the Oldest Old (AHEAD) cohort that was first surveyed in 1993. We consider the level of assets that households hold in the last survey wave preceding their death. We study how assets at the end of life depend on three family status pathways prior to death--(1) original one-person households in 1993, (2) persons in two-person household in 1993 with a deceased spouse in the last year observed, and (3) persons in two-person households in 1993 with the spouse alive when last observed. We find that a substantial fraction of persons die with virtually no financial assets--46.1 percent with less than 10,000--and many of these households also have no housing wealth and rely almost entirely on Social Security benefits for support. In addition this group is disproportionately in poor health. Based on a replacement rate comparison, many of these households may be deemed to have been well-prepared for retirement, in the sense that their income in their final years was not substantially lower than their income in their late 50s or early 60s. Yet with such low asset levels, they would have little capacity to pay for unanticipated needs such as health expenses or other financial shocks or to pay for entertainment, travel, or other activities. This raises a question of whether the replacement ratio is a sufficient statistic for the adequacy of retirement preparation.}, keywords = {Consumption and Savings, Employment and Labor Force, Event History/Life Cycle, Net Worth and Assets, Women and Minorities}, url = {URL:http://www.nber.org/papers/w17824.pdf URL}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {5910, title = {The Composition and Draw-down of Wealth in Retirement}, number = {17536}, year = {2011}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {This paper presents evidence on the resources available to households as they enter retirement. It draws heavily on data collected by the Health and Retirement Study and calculates the potential additional annuity income that households could purchase, given their holdings of non-annuitized financial assets at the start of retirement. Even if households used all of their financial assets inside and outside personal retirement accounts to purchase a life annuity, only 47 percent of households between the ages of 65 and 69 in 2008 could increase their life-contingent income by more than 5,000 per year. At the upper end of the wealth distribution, however, a substantial number of households could make large annuity purchases. The paper also considers the role of housing equity in the portfolios of retirement-age households, and explores the extent to which households draw down housing equity and financial assets as they age. Many households appear to treat housing equity and non-annuitized financial assets as precautionary savings, tending to draw them down only when they experience a shock such as the death of a spouse or a period of substantial medical outlays. Because home equity is often conserved until very late in life, for many households it may provide some insurance against the risk of living longer than expected.}, keywords = {Consumption and Savings, Employment and Labor Force, Event History/Life Cycle, Women and Minorities}, doi = {10.3386/w17536}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {7581, title = {Economic Measurement in the Health and Retirement Study}, journal = {Forum for Health Economics and Policy}, volume = {14}, year = {2011}, pages = {Article 2}, publisher = {14}, abstract = {The Health and Retirement Study (HRS) is widely use for research on the well-being of the elderly. This paper assesses the quality of economic and financial variables in the HRS. I find the coverage is comprehensive and the quality of the data is uniformly high. Thus the HRS has earned its position as the most widely used data source for research on retirement, saving adequacy, pension policy and a host of other aging-related topics. I identify two general areas that continue to merit special attention. The first is measurement error, particularly errors arising from item non-response and from inaccurate respondent reports of the ownership and level of assets. The second is the quality of the pension data. Where appropriate, I make suggestions for improving economic measures in the HRS.}, keywords = {Methodology, Pensions, Retirement Planning and Satisfaction}, doi = {https://doi.org/10.2202/1558-9544.1273}, author = {Steven F Venti} } @article {5825, title = {The Asset Cost of Poor Health}, number = {16389}, year = {2010}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {This paper examines the correlation between poor health and asset accumulation for households in the first nine waves of the Health and Retirement Survey. Rather than enumerating the specific costs of poor health, such as out of pocket medical expenses or lost earnings, we estimate how the evolution of household assets is related to poor health. We construct a simple measure of health status based on the first principal component of HRS survey responses on self-reported health status, diagnoses, ADLs, IADL, and other indicators of underlying health. Our estimates suggest large and substantively important correlations between poor health and asset accumulation. We compare persons in each 1992 asset quintile who were in the top third of the 1992 distribution of latent health with those in the same 1992 asset quintile who were in the bottom third of the latent health distribution. By 2008, those in the top third of the health distribution had accumulated, on average, more than 50 percent more assets than those in the bottom third of the health distribution. This asset cost of poor health appears to be larger for persons with substantial 1992 asset balances than for those with lower balances.}, keywords = {Health Conditions and Status, Net Worth and Assets}, doi = {10.3386/w16389}, author = {James M. Poterba and Steven F Venti and David A Wise} } @inbook {NBERc8416, title = {Demographic Trends, Housing Equity, and the Financial Security of Future Retirees}, booktitle = {Demography and the Economy}, year = {2010}, pages = {227-287}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, abstract = {About 80 percent of households with heads at retirement age own a home. Aside from Social Security and dedicated retirement saving, home equity is the primary asset of a large fraction of these homeowners. Thus, the fi nancial security of many older households depends importantly on the value of their homes. Venti and Wise (1990, 2001, 2004); Megbolugbe, Sa- Aadu, and Shilling (1997); and Banks et al. (2010) show that housing equity tends to be withdrawn when households experience shocks to family status like entry to a nursing home or death of a spouse. If, as these analyses suggest, housing equity is conserved for a {\textquotedblleft}rainy day,{\textquotedblright} then the value of housing can have important implications for the reserve of wealth in the event of such shocks}, keywords = {Demography, Financial security, Housing}, isbn = {0-226-75472-3}, url = {http://www.nber.org/chapters/c8416}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {5784, title = {Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets}, number = {15789}, year = {2010}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {We consider the evolution of assets after retirement. We ask whether total assets--including housing equity, personal retirement accounts, and other financial assets--tend to be husbanded for a rainy day and drawn down primarily at the time of precipitating shocks, or whether they are drawn down throughout the retirement period. We focus on the relationships between family status transitions, latent health status, and the evolution of assets. Our analysis is based primarily on longitudinal data from the HRS and AHEAD cohorts of the Health and Retirement Study. We find that the evolution of assets is strongly related to family status transitions. For both single individuals and married couples who do not experience a death or divorce, total assets increase well into old age. In contrast, individuals in married couples that experience a family status transition, either a death or a divorce, exhibit much slower asset growth and often experience a large decline in asset values at the time of the transition. In addition, the level and evolution of assets is very strongly related to health, measured by a latent health index. For example, for continuing two-person HRS households between the ages of 56 and 61 in 1992 the ratio of assets of households in the top health quintile to the assets of those in the bottom quintile was 1.7 in 1992. It had increased to 2.2 by the end of 2006.}, keywords = {Adult children, Housing, Net Worth and Assets, Pensions}, doi = {10.3386/w15789}, author = {James M. Poterba and Steven F Venti and David A Wise} } @inbook {NBERc4543, title = {Reducing Social Security PRA Risk at the Individual Level: Life-Cycle Funds and No-Loss Strategies}, booktitle = {Social Security Policy in a Changing Environment}, year = {2009}, pages = {255-292}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, abstract = {Retirement savers in a Social Security system with a personal retirement account (PRA) component would face the challenge of deciding how to allocate their PRA portfolios across a broad range of asset classes and across many different financial products. Asset allocation decisions have important consequences for retirement wealth accumulation because they affect the expenses of investing as well as the risk of low returns. The goal of this chapter is to assess the relative risk associated with alternative asset allocation strategies in PRAs. It also offers insight on the consequences of different asset allocation rules in current private-sector defined contribution (DC) plans, such as 401(k) plans. Quantifying the risk associated with }, keywords = {Social Security}, url = {http://www.nber.org/chapters/c4543}, author = {James M. Poterba and Joshua Rauh and Steven F Venti and David A Wise} } @article {10742, title = {Tapping Assets in Retirement: Which Assets, How, and When?}, year = {2008}, institution = {NBER}, abstract = {Just two or three decades ago retirement saving in the United States was based heavily on employer-provided defined benefit plans. Benefits after retirement were typically received in the form of lifetime annuities. Now personal retirement accounts{\textemdash}401(k), IRA, Keogh, and others plans{\textemdash}have become the primary form of saving for retirement. In 2007, private sector defined contribution assets totaled $9.2 trillion and assets in traditional defined benefit programs were $2.4 trillion (ICI 2008). At the time of retirement, the participant has sole control of the accumulated assets in these plans and must determine when to withdraw assets from the plans. To date, assets held in personal retirement accounts have rarely been annuitized. This has raised concern that some participants will draw down assets precipitously and run the danger of outliving their assets. In this paper, we consider the drawdown of assets after retirement, in particular the drawdown of 401(k)-like assets. }, keywords = {Assets}, url = {https://www.researchgate.net/publication/241384656_Tapping_Assets_in_Retirement_Which_Assets_How_and_When}, author = {James M. Poterba and David A Wise and Steven F Venti} } @conference {NBERw13381, title = {The Changing Landscape of Pensions in the United States}, booktitle = {Increasing the Effectiveness of Financial Education and Saving Programs}, year = {2007}, publisher = {NBER}, organization = {NBER}, abstract = {The pension landscape in the U.S. has changed dramatically over the past 25 years. Saving through personal retirement accounts has become the principal form of retirement saving. We document the transition from a defined benefit system to a personal account system and show the effect it has had on wealth at retirement. We summarize results from other research we have done to project the growth of retirement assets over the next three decades. Our projections suggest that the advent of personal account saving will increase wealth at retirement for future retirees across the lifetime earnings spectrum.}, keywords = {Pensions}, doi = {10.3386/w13381}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {7172, title = {DEFINED CONTRIBUTION PLANS, DEFINED BENEFIT PLANS, AND THE ACCUMULATION OF RETIREMENT WEALTH.}, journal = {J Public Econ}, volume = {91}, year = {2007}, month = {2007 Nov 01}, pages = {2062-2086}, publisher = {91}, abstract = {

The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on the participant{\textquoteright}s contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant{\textquoteright}s labor market experience and to plan parameters. This paper simulates the distribution of retirement wealth under representative DB and DC plans. It uses data from the Health and Retirement Study (HRS) to explore how asset returns, earnings histories, and retirement plan characteristics contribute to the variation in retirement wealth outcomes. We simulate DC plan accumulation by randomly assigning individuals a share of wages that they and their employer contribute to the plan. We consider several possible asset allocation strategies, with asset returns drawn from the historical return distribution. Our DB plan simulations draw earnings histories from the HRS, and randomly assign each individual a pension plan drawn from a sample of large private and public defined benefit plans. The simulations yield distributions of both DC and DB wealth at retirement. Average retirement wealth accruals under current DC plans exceed average accruals under private sector DB plans, although DC plans are also more likely to generate very low retirement wealth outcomes. The comparison of current DC plans with more generous public sector DB plans is less definitive, because public sector DB plans are more generous on average than their private sector counterparts.

}, issn = {0047-2727}, doi = {10.1016/j.jpubeco.2007.08.004}, author = {James M. Poterba and Joshua Rauh and Steven F Venti and David A Wise} } @article {NBERw13083, title = {New Estimates of the Future Path of 401(k) Assets}, number = {13083}, year = {2007}, institution = {The National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {Over the past two and a half decades there has been a fundamental change in saving for retirement in the United States, with a rapid shift from employer-managed defined benefit pensions to defined contribution saving plans that are largely controlled by employees. To understand how this change will affect the well-being of future retirees, we project the future growth of assets in self-directed personal retirement plans. We project the 401(k) assets at age 65 for cohorts attaining age 65 between 2000 and 2040. We also project the total value of assets in 401(k) accounts in each year through 2040 and we project the value of 401(k) assets as a percent of GDP over this period. We conclude that cohorts that attain age 65 in future decades will have accumulated much greater retirement saving (in real dollars) than the retirement saving of current retirees.}, keywords = {Wealth}, doi = {10.3386/w13083}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {NBERw13091, title = {Rise of 401(k) Plans, Lifetime Earnings, and Wealth at Retirement}, number = {13091}, year = {2007}, institution = {The National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {Saving through private pensions has been an important complement to Social Security in providing for the financial needs of older Americans. In the past twenty five years, however, there has been a dramatic change in private retirement saving. Personal retirement accounts have replaced defined benefit pension plans as the primary means of retirement saving. It is important to understand how this change will affect the wealth of future retirees. The personal retirement account system is not yet mature. A person who retired in 2000, for example, could have contributed to a 401(k) for at most 18 years and the typical 401(k) participant had only contributed for a little over seven years. Nonetheless, current 401(k) assets are quite large. We consider in this paper the implications of rising 401(k) saving through the year 2040. In particular, we emphasize the growth of the sum of Social Security wealth and 401(k) assets for families in each decile of the Social Security wealth distribution. Our projections show a substantial increase between 2000 and 2040 in the sum of these retirement assets in each wealth decile. We also consider the accumulation of 401(k) assets by families in different deciles of the distribution of lifetime earnings.}, keywords = {401(k), Wealth}, doi = {10.3386/w13091}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {NBERw11974, title = {Lifecycle Asset Allocation Strategies and the Distribution of 401(k) Retirement Wealth}, number = {11974}, year = {2006}, institution = {The National Bureau of Economic Research}, address = {Washington, D.C.}, abstract = {This paper examines how different asset allocation strategies over the course of a worker{\textquoteright}s career affect the distribution of retirement wealth and the expected utility of wealth at retirement. It considers both rules that allocate a constant portfolio fraction to various assets at all ages, as well as "lifecycle" rules that vary the mix of portfolio assets as the worker ages. The analysis simulates retirement wealth using asset returns that are drawn from the historical return distribution. The results suggest that the distribution of retirement wealth associated with typical lifecycle investment strategies is similar to that from age-invariant asset allocation strategies that set the equity share of the portfolio equal to the average equity share in the lifecycle strategies. There is substantial variation across workers with different characteristics in the expected utility from following different asset allocation strategies. The expected utility associated with different 401(k) asset allocation strategies, and the ranking of these strategies, is very sensitive to three parameters: the expected return on corporate stock, the worker{\textquoteright}s relative risk aversion, and the amount of non-401(k) wealth that the worker will have available at retirement. At modest levels of risk aversion, or in the presence of substantial non-401(k) wealth at retirement, the historical pattern of stock and bond returns implies that the expected utility of an all-stock investment allocation rule is greater than that from any of the more conservative strategies. Higher risk aversion or lower expected returns on stocks raise the expected utility of following lifecycle strategies or other strategies that reduce equity exposure throughout the lifetime.}, keywords = {Wealth}, doi = {10.3386/w11974}, author = {James M. Poterba and Joshua Rauh and Steven F Venti and David A Wise} } @inbook {5185, title = {Utility Evaluation of Risk in Retirement Saving Accounts}, booktitle = {Analyses in the Economics of Aging}, year = {2005}, note = {RDA ProCite field 6 : In ProCite field 8 : ed}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, address = {Chicago}, abstract = {The shift from defined benefit to defined contribution plans in the United States has drawn new attention to the effect of participants{\textquoteright} asset allocation decisions on their financial resources for retirement. This paper develops a stochastic simulation algorithm to evaluate the effect of holding a broadly diversified portfolio of common stocks, or a portfolio of index bonds, on the distribution of 401(k) account balances at retirement. We compare the alternative distributions of retirement wealth both by showing the empirical distribution of potential wealth values, and by computing the expected utility of these outcomes under standard assumptions about the structure of household preferences. Our analysis highlights the critical role of other sources of wealth, such as Social Security, defined benefit pension annuities, and saving outside retirement plans in determining the expected utility cost of holding equities in the retirement account. Our findings also demonstrate the importance of the equity premium in affecting investors{\textquoteright} utility from different retirement asset allocations. Viewed from the beginning of a working career, and given the historical pattern of returns on stocks and bonds, a household that does not have extremely high risk aversion would achieve a higher expected utility by holding a portfolio of stocks rather than bonds.}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction}, doi = {10.3386/w9892}, author = {James M. Poterba and Joshua Rauh and Steven F Venti and David A Wise}, editor = {David A Wise} } @inbook {5138, title = {Aging and Housing Equity: Another Look}, booktitle = {Perspectives on the Economics of Aging}, year = {2004}, note = {ProCite field 6 : In ProCite field 8 : ed.}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, address = {Chicago}, abstract = {Prior research has shown that except for Social Security and employer-provided pension assets, housing equity is the most important asset of a large fraction of older Americans. These assets are the primary source of retirement consumption. This paper looks at the change in the home equity of older families as they age. The two ways for households to change home equity are by discontinuing home ownership- an action that seems to be fairly unlikely- or by selling and moving to another home. Findings suggest that housing equity increases with age until about age 75 and then declines slightly as households grow older. In general, home equity should not be counted on to support general non-housing consumption needs as households grow older.}, keywords = {Adult children, Housing, Net Worth and Assets}, url = {http://www.nber.org/papers/w8608}, author = {Steven F Venti and David A Wise}, editor = {David A Wise} } @inbook {5194, title = {The Transition to Personal Retirement Accounts and Increasing Retirement Wealth}, booktitle = {Perspectives on the Economics of Aging}, year = {2004}, note = {ProCite field 6 : In ProCite field 8 : ed.}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, address = {Chicago, IL}, abstract = {Retirement saving has changed dramatically over the last two decades. There has been a shift from employer-managed defined benefit pensions to defined contribution retirement saving plans that are largely controlled by employees. In 1980, 92 percent of private retirement saving contributions were to employer-based plans and 64 percent of these contributions were to defined benefit plans. Today, about 85 percent of private contributions are to plans in which individuals decide how much to contribute to the plan, how to invest plan assets and how and when to withdraw money from the plan. In this paper we use both macro and micro data to describe the change in retirement assets and in retirement saving. We give particular attention to the possible substitution of pension assets in one plan for assets in another plan such as the substitution of 401(k) assets for defined benefit plan assets. Aggregate data show that between 1975 and 1999 assets to support retirement increased about five-fold relative to wage and salary income. This increase suggests large increases in the wealth of future retirees. The enormous increase in defined contribution plan assets dwarfed any potential displacement of defined benefit plan assets. In addition, in recent years the annual {\textquoteright}retirement plan contribution rate,{\textquoteright} defined as retirement plan contributions as a percentage of NIPA personal income, has been over 5 percent. This is much higher than the NIPA total personal saving rate, which has been close to zero. Retirement saving as a share of personal income today would likely be at least one percentage point greater had it not been for legislation in the 1980s that limited employer contributions to defined benefit pension plans, and the reduction in defined benefit plan contributions associated with the rising stock market of the 1990s. It is also likely that the {\textquoteright}retirement plan contribution rate{\textquoteright} would be much higher today if it were not for the 1986 retrenchment of the IRA program. Rising retirement plan contributions, as well as favorable rates of return on retirement plan assets in the 1990s, explain the large increase in these assets relative to income. Employee retirement saving under a defined contribution plan is easily measured and quite}, keywords = {Net Worth and Assets, Pensions}, doi = {10.3386/w8610}, author = {James M. Poterba and Steven F Venti and David A Wise}, editor = {David A Wise} } @inbook {5187, title = {Saving, Public Policy, and Late-Life Inequality}, booktitle = {Focus on Economic Outcomes in Later Life: Public Policy, Health, and Cummulative Advantage}, series = {Annual Review of Gerontology and Geriatrics}, volume = {22}, year = {2003}, note = {RDA 1998-006 (Lusardi) ProCite field 6 : Chapter 10 in ProCite field 8 : eds.}, pages = {207-238}, publisher = {Springer Publishing Company}, organization = {Springer Publishing Company}, chapter = {10}, address = {New York, NY}, keywords = {Consumption and Savings, Public Policy}, doi = {10.1891/0198-8794.22.1.207}, author = {Annamaria Lusardi and Jonathan S Skinner and Steven F Venti}, editor = {Crystal, Stephen and Dennis G. Shea} } @inbook {5188, title = {Aging and Housing Equity}, booktitle = {Innovations in Retirement Financing}, year = {2002}, note = {ProCite field 6 : In ProCite field 8 : eds.}, publisher = {University of Pennsylvania Press/Pension Research Council}, organization = {University of Pennsylvania Press/Pension Research Council}, address = {Philadephia, PA}, keywords = {Housing}, url = {http://www.nber.org/papers/w7882}, author = {Steven F Venti and David A Wise}, editor = {Zvi Bodie and P. Brett Hammond and Olivia S. Mitchell and Stephen P. Zeldes} } @inbook {5179, title = {Choice, Chance, and Wealth Dispersion at Retirement}, booktitle = {Aging Issues in the United States and Japan}, year = {2001}, note = {RDA 1999-002 ProCite field 8 : eds.}, pages = {25-64}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, address = {Chicago}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction}, doi = {10.3386/w7521}, author = {Steven F Venti and David A Wise}, editor = {Seiritsu Ogura and Toshiaki Tachibanaki and David A Wise} } @inbook {5177, title = {Preretirement Cashouts and Foregone Retirement Saving: Implications for 401(k) Asset Accumulation}, booktitle = {Themes in the Economics of Aging}, year = {2001}, note = {RDA 1999-002 Wise ProCite field 6 : In ProCite field 8 : ed}, pages = {23-58}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, address = {Chicago, IL}, keywords = {Consumption and Savings, Net Worth and Assets, Pensions}, url = {https://www.nber.org/chapters/c10320}, author = {James M. Poterba and Steven F Venti and David A Wise}, editor = {David A Wise} } @article {NBERw8237, title = {Saving Puzzles and Saving Policies in the United States}, year = {2001}, institution = {NBER}, abstract = {In the past two decades the widely reported personal saving rate in the United States has dropped from double digits to below zero. First, we attempt to account for the decline in the National Income and Product Accounts (NIPA) saving rate. The macroeconomic literature suggests that about half of the drop since 1988 can be attributed to households spending stock market capital gains. Another thirty percent is accounting transfers from personal saving into government and corporate saving because of the way pensions and capital gains taxes are treated in the NIPA. Second, while NIPA saving measures are well suited for measuring the supply of new funds for investment and capital accumulation, it is not clear that they should be the target of government saving policies. Finally, we emphasize that the NIPA saving rate is not useful in judging whether households are preparing for retirement or other contingencies. Many households have accumulated significant wealth, primarily through retirement saving vehicles and capital gains, even as the saving rate slid. There remains a segment of the population, however, who save little and whose behavior appears untouched either by the stock market boom or the slide in personal saving. We explore reasons and policy options for their puzzlingly low saving rate.}, keywords = {Saving, Saving behavior, Wealth, wealth accumulation}, doi = {10.3386/w8237}, url = {http://www.nber.org/papers/w8237}, author = {Annamaria Lusardi and Jonathan S Skinner and Steven F Venti} } @article {6717, title = {Saver Behavior and 401(k) Retirement Wealth}, journal = {American Economic Review}, volume = {90}, year = {2000}, note = {RDA 1999-002}, pages = {297-302}, publisher = {90}, abstract = { Contributions to 401(k) plans are now the most important form of retirement saving. Since 401(k) plans were introduced in the early 1980{\textquoteright}s, they have expanded rapidly and continuously. By 1998, roughly half of all households were eligible to participate in 401(k) plans, and more than 36 million workers made contributions to these employer-provided saving plans. In 1995, the last year for which the U.S. Department of Labor has released definitive data, 401(k) contribu- tions amounted to $87.4 billion, or 55 percent of all contributions to employer-sponsored pension plans. The level of contributions, and their share of all pension contributions, is probably signifi- cantly higher today. The spread of 401(k) plans is the most important indicator of the move to personal retirement saving. In 1980, almost 92 percent of pension-plan contributions were to tradi- tional employer-provided plans, and about 64 percent of these contributions were to conventional defined-benefit plans. Today, almost 60 percent of contributions are to personal retirement accounts, including 401(k), IRA, and Keogh plans. Including employer- provided, non-40 1 (k) defined-contribution plans, over 76 percent of contributions are to plans that are controlled in large measure by individuals. These individuals make partici- pation, contribution, asset-allocation, and withdrawal decisions. In this paper, we describe the likely impor- tance of 401(k) assets for future older Ameri- cans and the effect of investment decisions on asset accumulation. We also examine the extent to which retirement assets may be affected by several decisions: preretirement withdrawals, management fees and expenses, contribution rates, and early retirement. Our analysis focuses on 401(k) saving, but applies more broadly to other forms of individual retirement saving.}, keywords = {Consumption and Savings, Net Worth and Assets, Pensions, Retirement Planning and Satisfaction, Social Security}, url = {https://www.jstor.org/stable/117239?seq=1}, author = {James M. Poterba and Steven F Venti and David A Wise} } @inbook {5126, title = {Lifetime Earnings, Saving Choices, and Wealth at Retirement}, booktitle = {Wealth, work, and health: Innovations in measurement in the social sciences: Essays in honor of F. Thomas Juster}, year = {1999}, note = {RDA 1999-002 WiseProCite field[8]: eds}, pages = {87-120.}, publisher = {University of Michigan Press}, organization = {University of Michigan Press}, address = {Ann Arbor, MI}, keywords = {Consumption and Savings, Event History/Life Cycle, Methodology, Net Worth and Assets, Retirement Planning and Satisfaction}, author = {Steven F Venti and David A Wise}, editor = {James P Smith and Robert J. Willis} } @article {6621, title = {401(k) Plans and future patterns of retirement saving}, journal = {American Economic Review}, volume = {88}, year = {1998}, note = {RDA 1999-002}, pages = {179-184}, publisher = {88}, abstract = {This paper summarizes current participation and contribution patterns in 401(k) plans and projects 401(k) balances at retirement age for workers currently between the ages of 30 and 40. The various factors that will influence future 401(k) balances are discussed. The projections based on HRS data suggest that 401(k) plans are likely to play a significant role in providing for the retirement income of future retirees.}, keywords = {Employment and Labor Force, Net Worth and Assets, Pensions, Retirement Planning and Satisfaction}, url = {https://www.jstor.org/stable/116915?seq=1}, author = {James M. Poterba and Steven F Venti and David A Wise} } @article {6602, title = {The Cause of Wealth Dispersion at Retirement: Choice or Chance?}, journal = {American Economic Review}, volume = {88}, year = {1998}, note = {RDA 1999-002 ProCite field 3 : Dartmouth College; NBER}, pages = {185-91}, publisher = {88}, keywords = {Income, Net Worth and Assets, Retirement Planning and Satisfaction}, url = {https://www.jstor.org/stable/116916?seq=1}, author = {Steven F Venti and David A Wise} } @inbook {5162, title = {Implications of Rising Personal Retirement Saving}, booktitle = {Frontiers in the Economics of Aging}, year = {1998}, note = {RDA 1999-002 ProCite field 8 : ed.}, pages = {125-167}, publisher = {University of Chicago Press}, organization = {University of Chicago Press}, address = {Chicago, IL}, abstract = {This paper simulates the 401(k) assets of future generations of retirees and compares these assets with the social security and other assets of the households who are approaching retirement now. The accumulation of 401(k) assets at retirement for the cohort that was 25 years old in 1984 and the cohort that was 15 years old in 1984 was projected. Findings based on these projections suggest that 401(k) assets will definitely be a significant component of the retirement wealth of future retirees and could be the dominant component for a large fraction of them.}, keywords = {Employment and Labor Force, Income, Pensions}, author = {James M. Poterba and Steven F Venti and David A Wise}, editor = {David A Wise} } @article {5316, title = {Lump-Sum Distributions from Retirement Saving Plans: Receipt and Utility}, year = {1995}, institution = {NBER}, abstract = {One of the central issues in evaluating the ongoing shift from defined benefit (DB) to defined contribution (DC) pension plans is the degree to which assets in DC plans will be withdrawn before plan participants reach retirement age. The annual flow of withdrawals from such plans, which are known as lump sum distributions and which are frequently but not always associated with employment changes, has exceeded 100 billion in recent years. This flow is substantially greater than the flow of new contributions to IRAs and other targeted retirement saving programs. This paper draws on data from the 1993 Current Population Survey and the Health and Retirement Survey to summarize the incidence and disposition of lump sum distributions. We find that while less than half of all lump sum distributions are rolled over into IRAs or other retirement saving plans, large distributions are substantially more likely to be saved than smaller ones are. Consequently, more than half of the dollars paid out as lump sum distributions are reinvested. We also explore the correlation between various individual characteristics and the probability of rolling over a lump sum distribution. This is a first step toward developing a model that can be used to evaluate the long- term effects of lump sum distributions, or policies that might affect them, on the financial status of elderly households.}, keywords = {Income, Net Worth and Assets}, url = {https://www.researchgate.net/publication/5193273_Lump-Sum_Distributions_from_Retirement_Saving_Plans_Receipt_and_Utilization}, author = {James M. Poterba and Steven F Venti and David A Wise} }