Health and Wealth in Early Retirement

Geoffrey L. Wallace, Robert Haveman, Karen Holden and Barbara Wolfe (bwolfe@wisc.edu)

No 669, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: Retirement years are a precarious time for many older Americans. Even if successful in accumulating resources expected to be sufficient to maintain their pre-retirement standard of living, many retirees face unexpected adverse health shocks after retirement. Because of the uncertainty of shocks to physical and cognitive health, there exists the potential for significant deterioration in resource adequacy both at the time of retirement and into the retirement years due to their occurrence. In this study, we select a sample of new retirees constructed from the Health and Retirement Study (HRS) data and follow them during the first decade of their retirement. Using these data, we identify the nature of shocks to physical and cognitive health for which individuals are at risk during their retirement years, and estimate both the absolute and relative risk of these shocks. We then estimate the impact of the occurrence of these shocks on wealth-based measures of retirement adequacy.

Date: 2012-08
New Economics Papers: this item is included in nep-age and nep-hea
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