Download this Paper Open PDF in Browser

Do Households Increase Their Savings When the Kids Leave Home?

27 Pages Posted: 7 Oct 2015  

Irena Dushi

U.S. Social Security Administration

Alicia H. Munnell

Boston College - Center for Retirement Research

Geoffrey Sanzenbacher

Boston College Economics Department

Anthony Webb

Boston College - Center for Retirement Research

Multiple version iconThere are 2 versions of this paper

Date Written: September 2015

Abstract

Much of the disagreement over whether households are adequately prepared for retirement reflects differences in assumptions regarding the extent to which consumption declines when the kids leave home. If consumption declines substantially when the kids leave home, as some life-cycle models of retirement saving assume, households need to achieve lower replacement rates in retirement and need to accumulate less wealth. Using administrative tax data from the Health and Retirement Study (HRS), as well as the Survey of Income and Program Participation (SIPP), this paper investigates whether household consumption declines when kids leave the home and, if so, by how much. Because consumption data are noisy and savings is the flip side of consumption, this paper examines whether savings in 401(k) plans increase when the kids leave home. The paper also investigates alternative methods of saving, including non-401(k) savings and increased mortgage payments.

Suggested Citation

Dushi, Irena and Munnell, Alicia H. and Sanzenbacher, Geoffrey and Webb, Anthony, Do Households Increase Their Savings When the Kids Leave Home? (September 2015). Available at SSRN: https://ssrn.com/abstract=2669704 or http://dx.doi.org/10.2139/ssrn.2669704

Irena Dushi (Contact Author)

U.S. Social Security Administration ( email )

Washington, DC 20254
United States

Alicia Munnell

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Geoffrey Sanzenbacher

Boston College Economics Department ( email )

United States

Anthony Webb

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Paper statistics

Downloads
50
Abstract Views
258