Working Paper: NBER ID: w12585
Authors: Annamaria Lusardi; Olivia S. Mitchell
Abstract: We compare wealth holdings across two cohorts of the Health and Retirement Study: the early Baby Boomers in 2004, and individuals in the same age group in 1992. Levels and patterns of total net worth have changed relatively little over time, though Boomers rely more on housing equity than their predecessors. Most important, planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non-planners. Instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth.
Keywords: retirement planning; financial literacy; housing wealth; baby boomers
JEL Codes: D91; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial literacy (G53) | Planning behavior (L21) |
| Planning behavior (L21) | Savings (D14) |
| Planning behavior (L21) | Wealth accumulation (E21) |
| Financial literacy (G53) | Wealth accumulation (E21) |
| Planning behavior (L21) | Total net worth (G19) |
| Planning behavior (L21) | Nonhousing wealth (G59) |
| Planning behavior (L21) | Median wealth (D31) |