Working Paper: NBER ID: w20547
Authors: John Laitner; Daniel Silverman; Dmitriy Stolyarov
Abstract: We introduce a tractable model of post-retirement saving behavior in which households have a precautionary motive arising from uninsured health status risks. The model distinguishes between annuitized and non-annuitized wealth, emphasizes the importance of asset composition in determining optimal household behavior, and includes an extension allowing late-in-life exchange transactions among relatives. We consider three puzzles in micro data - rising cohort average wealth of retirees, lack of demand for market annuities, and the relative scarcity of bequests - and show that our model can provide intuitive explanations for each.
Keywords: postretirement saving; annuitized wealth; health risks; household behavior
JEL Codes: D91; E21; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher annuitization (G52) | Increased likelihood of post-retirement saving (D14) |
| High transaction costs and inflexibility (D23) | Lack of demand for secondary annuities (G52) |
| Family support (J12) | Elimination of demand for secondary annuities (G52) |