Why Do Retired Households Draw Down Their Wealth So Slowly?
Journal of Economic Perspectives
vol. 37,
no. 4, Fall 2023
(pp. 91-114)
(Complimentary)
Abstract
Retired households, especially those with high lifetime income, decumulate their wealth very slowly, and many die leaving large estates. The three leading explanations for the "retirement savings puzzle" are the desire to insure against uncertain lifespans and medical expenses, the desire to leave bequests to one's heirs, and the desire to remain in one's own home. We discuss the empirical strategies used to differentiate these motivations, most of which go beyond wealth to exploit additional features of the data. The literature suggests that all the motivations are present, but has yet to reach a consensus about their relative importance.Citation
French, Eric, John Bailey Jones, and Rory McGee. 2023. "Why Do Retired Households Draw Down Their Wealth So Slowly?" Journal of Economic Perspectives, 37 (4): 91-114. DOI: 10.1257/jep.37.4.91Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J26 Retirement; Retirement Policies
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