Economic Preparation for Retirement

Michael Hurd () and Susann Rohwedder

No 17203, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We define and estimate measures of economic preparation for retirement based on a complete inventory of economic resources while taking into account the risk of living to advanced old age and the risk of high out-of-pocket spending for health care services. We ask whether, in a sample of 66-69 year-olds, observed economic resources could support with high probability a life-cycle consumption path anchored at the initial level of consumption until the end of life. We account for taxes, widowing, differential mortality and out-of-pocket health spending risk. We find that 71% of persons in our target age group are adequately prepared according to our definitions, but there is substantial variation by observable characteristics: 80% of married persons are adequately prepared compared with just 55% of single persons. We estimate that a reduction in Social Security benefits of 30 percent would reduce the fraction adequately prepared by 7.8 percentage points among married persons and by as much as 10.7 percentage points among single persons.

JEL-codes: E21 J14 J26 (search for similar items in EconPapers)
Date: 2011-07
Note: AG
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Citations: View citations in EconPapers (8)

Published as Economic Preparation for Retirement , Michael D. Hurd, Susann Rohwedder. in Investigations in the Economics of Aging , Wise. 2012

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Chapter: Economic Preparation for Retirement (2011)
Working Paper: Economic Preparation for Retirement (2011)
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