Lifetime earnings, Social Security benefits, and the adequacy of retirement wealth accumulation

Engen

Eric M.

Engen, Eric M.

Author

Gale

William G.

Gale, William G.

Author

Uccello

Cori

Uccello, Cori

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20042004monographic

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2004

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

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.

Eric M. Engen, William G. Gale, and Cori Uccello.

CRR WP2004-10

CRR WP

2004-10

http://crr.bc.edu/images/stories/Working_Papers/wp_2004-10.pdf

MChBEnglisheng

MChB

Englisheng

English

eng