Lifetime Earnings, Social Security Benefits, and the Adequacy of Retirement Wealth Accumulation
Boston College, Center for Retirement Research Working Paper No. 2004-10
42 Pages Posted: 15 May 2004
Date Written: April 2004
Abstract
This paper provides new evidence on the adequacy of household retirement saving. We depart from much previous research on the adequacy of saving in two key ways. First, our underlying simulation model of optimal wealth accumulation allows for precautionary saving against uncertain future earnings. Second, we employ data on lifetime earnings. Using data from the 1992 Health and Retirement Study, we find that households at the median of the empirical wealth-lifetime earnings distribution are saving as much or more as the underlying model suggests is optimal, and households at the high end of the wealth distribution are saving significantly more than the model indicates. But we also find significant undersaving among the lowest 25 percent of the population. We show that reductions in Social Security benefits could have significant deleterious effects on the adequacy of saving, especially among low-income households. We also show that, controlling for lifetime earnings, households with high current earnings tend to save far more adequately than other households.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Are All Americans Saving 'Optimally' for Retirement?
By John Karl Scholz and Ananth Seshadri
-
The Adequacy of Household Saving
By Eric M. Engen, William G. Gale, ...
-
Perspectives on the Household Saving Rate
By William G. Gale and John Sabelhaus
-
The Trajectory of Wealth in Retirement
By David A. Love, Michael Palumbo, ...
-
By John Karl Scholz and Ananth Seshadri
-
Market Value vs. Financial Accounting Measures of National Saving
-
Are Successive Generations Getting Wealthier, and If so, Why?
By William G. Gale and Karen M. Pence