Savings between Cohorts: The Role of Planning

46 Pages Posted: 19 Feb 2008

See all articles by Annamaria Lusardi

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Jason Beeler

Harvard University - Department of Economics

Date Written: July 2006

Abstract

We compare the saving behavior of two cohorts: the Early Baby Boomers (EBB, age 51- 56 in 2004) and the HRS cohort (age 51-56 in 1992). We find that EBB have accumulated more wealth than the previous cohort but they benefited from a large increase in house prices, which lifted the wealth of many home-owners. In fact, there are many families among EBB, particularly those headed by respondents with low education, low income, and minorities, which have less wealth than the previous cohort. Lack of wealth can be traced to lack of retirement planning. Notwithstanding the many initiatives aimed at fostering planning in the 1990s, a large portion of EBB still do not plan for retirement even though most respondents are close to it. The effect of planning is remarkably similar between the two cohorts; those who do not plan accumulate much lower amounts of wealth - from 20 to 45 percent depending on the location in the wealth distribution - than those who do plan. Thus, for both the EBB and the HRS cohort, lack of planning is tantamount to lack of saving irrespective of the many changes in the economy between 1992 and 2004.

Suggested Citation

Lusardi, Annamaria and Beeler, Jason, Savings between Cohorts: The Role of Planning (July 2006). Michigan Retirement Research Center Research Paper No. WP 2006-122. Available at SSRN: https://ssrn.com/abstract=1094989 or http://dx.doi.org/10.2139/ssrn.1094989

Annamaria Lusardi (Contact Author)

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jason Beeler

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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