Are All Americans Saving 'Optimally' for Retirement?

32 Pages Posted: 4 Feb 2009  

John Karl Scholz

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Ananth Seshadri

University of Wisconsin - Madison - Department of Economics

Date Written: September 1, 2008

Abstract

Many people fear that Americans are preparing poorly for retirement. But developing rigorous evidence on this issue is difficult. In this paper we briefly discuss evidence on the adequacy of retirement wealth accumulation. We conclude that existing descriptive evidence does not seem consistent with dire assessments of poor financial preparation. We then extend the straightforward, but computationally complex dynamic programming approach used in our earlier work to assess the adequacy of retirement wealth preparation of Americans born before 1954. We find only 4 percent of HRS households have net worth below their optimal targets in 2004, though this percentage is somewhat higher for more recent HRS cohorts. While our work is preliminary, we find little evidence that Americans born before 1954 have prepared poorly for retirement.

Suggested Citation

Scholz, John Karl and Seshadri, Ananth, Are All Americans Saving 'Optimally' for Retirement? (September 1, 2008). Michigan Retirement Research Center Research Paper No. 2008-189. Available at SSRN: https://ssrn.com/abstract=1337653 or http://dx.doi.org/10.2139/ssrn.1337653

John Karl Scholz (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-5380 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Ananth Seshadri

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-6196 (Phone)
608-263-3876 (Fax)

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