Explaining Why so Many People Do Not Save

Center for Retirement Research Working Paper No. 2001-05

43 Pages Posted: 4 Oct 2001

See all articles by Annamaria Lusardi

Annamaria Lusardi

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

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

Abstract

There are vast differences in wealth holdings, even among households in similar age groups. In addition, a large percentage of U.S. households arrive close to retirement with little or no wealth. While many explanations can be found to rationalize these facts, approximately thirty percent of households whose head is close to retirement have done little or no planning for retirement.

Planning is shaped by the experience of other individuals: individuals learn to plan for retirement from older siblings. They also learn from the experience of old parents. In particular, unpleasant events, such as financial difficulties and health shocks at the end of life, provide incentives toward planning. In addition, planning affects wealth levels as well as portfolio choice. Individuals who plan are more likely to hold large amounts of wealth and to invest their wealth holdings in high return assets, such as stocks. Thus, planning plays an important role in explaining the saving behavior of many households.

Keywords: Planning, siblings, wealth and portfolio choice

JEL Classification: D91, E21, C21

Suggested Citation

Lusardi, Annamaria, Explaining Why so Many People Do Not Save (September 2001). Center for Retirement Research Working Paper No. 2001-05. Available at SSRN: https://ssrn.com/abstract=285978 or http://dx.doi.org/10.2139/ssrn.285978

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

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