Are Americans saving "optimally" for retirement?
By: John Karl Scholz, Ananth Seshadri, Surachai Khitatrakun.
Contributors: Seshadri, Ananth.; Khitatrakun, Surachai.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10260; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10260.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Retirement -- United States -- Finance.; Saving and investment -- United States.
Description: "This paper examines the degree to which Americans are saving optimally for retirement.  Our standard for assessing optimality comes from a life-cycle model that incorporates uncertain lifetimes, uninsurable earnings and medical expenses, progressive taxation, government transfers, and pension and social security benefit functions derived from rich household data.  We solve every household''s decision problem from death to starting age and then use the decision rules in conjunction with earnings histories to make predictions about wealth in 1992.  Ours is the first study to compare, household by household, wealth predictions that arise from a life-cycle model that incorporates earnings histories for a nationally representative sample.  The results, based on data from the Health and Retirement Study, are striking we find that the model is capable of accounting for more than 80 percent of the 1992 cross-sectional variation in wealth.  Fewer than 20 percent of households have less wealth than their optimal targets, and the wealth deficit of those who are undersaving is generally small"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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