Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden

Makoto Nakajima () and Irina Telyukova ()

No 8, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Many U.S. households have significant wealth late in life, contrary to the predictions of a simple life-cycle model. In this paper, we document stark differences between U.S. and Sweden regarding out-of-pocket medical and long-term-care expenses late in life, and use them to investigate their role in discouraging the elderly from dissaving. Using a consumption-saving model in retirement with significant uninsurable expense risk, we find that medical expense risk accounts for a quarter of the U.S.-Sweden difference in retirees' dissaving patterns. Furthermore, medical expense risk affects primarily financial assets, while its impact on housing is limited.

Keywords: Household finance; Aging; retirement savings; Health; Cross-country analysis (search for similar items in EconPapers)
JEL-codes: D14 E21 J14 J26 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2018-04-10
New Economics Papers: this item is included in nep-age, nep-dge, nep-eur, nep-hea and nep-mac
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:0008

DOI: 10.21034/iwp.8

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