Annuitized wealth and post-retirement saving

  • Daniel Silverman Daniel Silverman
  • Dmitriy Stolyarov Dmitriy Stolyarov
  • John Laitner John Laitner

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.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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