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Retirement Wealth Inequality

Paper Session

Saturday, Jan. 6, 2018 2:30 PM - 4:30 PM

Pennsylvania Convention Center, 204-C
Hosted By: American Economic Association
  • Chair: Teresa Ghilarducci, New School

Longitudinal Determinants of Late-life Wealth

James Poterba
Massachusetts Institute of Technology
Steven Venti
Dartmouth College
David A. Wise
Harvard University


Why do most individuals have very few assets in the year they die? Mostly, people had no assets but even those with assets, many did not spend down over their retirement period. People with less education are more likely to have high rates of asset decline over their retirement years.

Using a Life Cycle Model to Evaluate Financial Literacy Program Effectiveness

Olivia S. Mitchell
University of Pennsylvania
Annamaria Lusardi
George Washington University
Pierre-Carl Michaud
HEC Montreal


Prior studies disagree regarding the effectiveness of financial literacy programs, especially those offered in the workplace. To explain such measurement differences in evaluation and outcomes, we employ a stochastic life cycle model with endogenous financial knowledge accumulation to investigate how financial education programs optimally shape key economic outcomes. This approach permits us to measure how such programs shape wealth accumulation, financial knowledge, and participation in sophisticated assets (e.g. stocks) across heterogeneous consumers. We then apply conventional program evaluation econometric techniques to simulated data, distinguishing selection and treatment effects. We show that the more effective programs provide follow-up in order to sustain the knowledge acquired by employees via the program; in such an instance, financial education delivered to employees around the age of 40 can raise savings at retirement by close to 10%. By contrast, one-time education programs do produce short-term but few long-term effects. We also measure how accounting for selection affects estimates of program effectiveness on those who participate. Comparisons of participants and non-participants can be misleading, even using a difference-in-difference strategy. Random program assignment is needed to evaluate program effects on those who participate.

Inequality in Retirement Wealth

Teresa Ghilarducci
New School
Siavesh Radpour
New School
Anthony Webb
New School


Over the past 20 years, defined contribution (DC) retirement plans have largely displaced defined benefit (DB) plans, while the average retirement age has increased, partly as a result of this displacement. Using data from the Health and Retirement Study (HRS), this paper answers to what extent has the displacement of DB by DC plans contributed to an increase in retirement income inequality; have the increases in retirement income inequality been masked by disproportionately large increases in retirement ages among those least well prepared for retirement.

Delayed Retirement and the Growth in Economic Inequality by Work Ability

Richard W. Johnson
Urban Institute


Work at older ages has increased sharply over the past two decades. Between 1995 and 2016,

labor force participation rates at ages 62 to 64 increased 12 percentage points for men and 13

percentage points for women. Longer careers improve retirement security by enabling workers to

accumulate more Social Security credits, devote part of their increased earnings to retirement

savings, and shorten the period over which those savings would be spread. However, health

problems prevent some workers from extending their careers, especially those with limited

education. In 2014, 25 percent of adults ages 62 to 64 reported fair or poor health, including 40

percent of those with no more than a high school diploma. As financial security in old age

increasingly depends on delaying retirement, older adults with health problems will fall further

behind their healthier counterparts.

Using data from the Health and Retirement Study (HRS), this study compares income and wealth

by health status for adults in their early 60s and finds that the health-related gap in economic

status has grown sharply over the past two decades. Between 1996 and 2014, median real income

at ages 62 to 64 increased 37 percent for adults in excellent or very good health but only 0.2

percent for those in fair or poor health. In 2014, median income at ages 62 to 64 was only 39

percent as high for adults in fair or poor health as for adults in excellent or very good health. In

1996, the ratio was 53 percent.
Charles Jeszeck
U.S. Government Accountability Office
Stephanie Kelton
Stony Brook University
Melinda Morrill
North Carolina State University
JEL Classifications
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
  • J3 - Wages, Compensation, and Labor Costs