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New Directions in Household Saving

Paper Session

Friday, Jan. 3, 2020 8:00 AM - 10:00 AM (PDT)

Marriott Marquis, Presidio 1 - 2
Hosted By: American Economic Association
  • Chair: Kathleen McGarry, University of California-Los Angeles

New Evidence on the Choice of Retirement Income Strategies

Jeffrey R. Brown
University of Illinois
James Poterba
Massachusetts Institute of Technology and NBER
David P. Richardson


This paper describes the retirement income choices of participants at TIAA, a mature defined contribution (DC) pension system, spanning the period 1999-2017. TIAA participants can choose to begin receiving annuity payouts on their retirement date, to postpone the receipt of annuity income by purchasing a deferred annuity, or to put off the decision about whether to annuitize by making only minimal or no withdrawals. The observed choices of participants inform questions about the demand for retirement income. First, only about one third of current retirees choose to annuitize at retirement, a fraction that has declined over time as payout options that withdraw only the participant’s required minimum distribution (RMD) each year have expanded. Second, while there are strong age-related differences in annuitization rates, the decline is observed for all age groups and coincides with a decline in long-term interest rates and in the ratio of the annual annuity payout to the value of assets annuitized. Third, among those who annuitize, only about two thirds make annuitization decisions at the time of retirement. Others delay the annuitization decision, often by several years. Finally, many individuals combine multiple strategies for drawing down their balances. The most common behavior is a sequence of decisions spanning many years, each drawing down a part of the DC plan balance. These empirical regularities offer new insights on a number of long-standing questions about the draw-down phase of retirement saving.

Lifecycle Patterns of Saving and Wealth Accumulation

Laura Feiveson
Federal Reserve Board
John Sabelhaus
Washington Center for Equitable Growth


Empirical analysis of U.S. income, saving and wealth dynamics is constrained by a lack of high-quality
and comprehensive household-level panel data. This paper uses a pseudo-panel approach,
tracking types of agents by birth cohort and across time through a series of cross-section snapshots
synthesized with macro aggregates. The key micro source data is the Survey of Consumer Finances
(SCF), which captures the top of the wealth distribution by sampling from administrative records.
The SCF has the detailed balance sheet components, incomes, and interfamily transfers needed to
use both sides of the intertemporal budget constraint and thus solve for saving and consumption.
The results here are consistent with recent papers based on individual panel data from countries
with administrative registries, and highlights the different roles of saving, capital gains, and
interfamily transfers in wealth change over the lifecycle and across permanent income groups.

Saving Behavior of Millennials

William Gale
Brookings Institution
Jason Fichtner
Johns Hopkins University
Hilary Gelfond
Harvard University


We consider prospects for retirement saving for members of the millennial generation, who will be between ages 54 and 69 in 2050. Adequacy of retirement saving preparation among current and near-retirees is marked by significant heterogeneity, a characteristic that will likely hold for Millennials as well. In preparing for retirement, Millennials will have several advantages relative to previous generations, such as more education, longer working lives, and more flexible work arrangements, but also several disadvantages, including having to take more responsibility for their own retirement plans and marrying and bearing children at later ages. The millennial generation contains a significantly higher percentage of minorities than previous generations. We find that minority households have tended to accumulate less wealth than whites in the past, even after controlling for income, education, and marital status, and the difference appears to be growing over time for black households relative to whites. Whether these trends persist is central to understanding how the Millennials will fare in retirement.
Olivia S. Mitchell
University of Pennsylvania
Gopi Shah Goda
Stanford University
Karen Dynan
Harvard University
JEL Classifications
  • D1 - Household Behavior and Family Economics
  • J3 - Wages, Compensation, and Labor Costs