Working Paper: NBER ID: w21268
Authors: Mariacristina De Nardi; Eric French; John B. Jones
Abstract: The saving patterns of retired U.S. households pose a challenge to the basic life-cycle model of saving. The observed patterns of out-of-pocket medical expenses, which rise quickly with age and income during retirement, and heterogeneous lifespan risk, can explain a significant portion U.S. savings during retirement. However, more work is needed to disentangle these precautionary saving motives from other motives, such as the desire to leave bequests. An important complementary question is why households do not buy more insurance against these risks. Going beyond total savings and looking at its components, including housing, and looking at other portfolio choices can help shed light on these questions.
Keywords: savings; retirement; medical expenses; bequests; insurance
JEL Codes: D1; D14; D31; E21; H2; I14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher medical expenses (H51) | increased savings (D14) |
| uncertain lifespans (D15) | decision to retain assets (G11) |
| savings for medical expenses (H51) | bequests (D64) |
| lack of insurance purchases (G52) | saving behavior (D14) |