Single again? Saving patterns when widowhood occurs

In this paper we examine the effect of widowhood on asset trajectories. In many industrialized countries, close to half of households are headed by women single, divorced, separated or widowed and therefore their ability to make financial decisions is crucial for their economic well‐being as well as their dependents’. Meanwhile, research has found that women tend to be less involved with the stock market and have lower financial sophistication, leaving them out of an important way of accumulating resources via investing and saving. At the same time their higher risk aversion may have sheltered them from some of the effects of the financial crisis. For a two‐adult household, the portfolio structure is likely to reflect preferences of the main financialdecision maker (usually the husband). When widowhood occurs it could be that singles re‐optimize their decisions according to their own preferences. We test this by examining whether there is a change in the wealth accumulation for households (over 60) that have experienced the shock of becoming widowed. Our results indicate there to be an initially statistically significant effect of widowhood on wealth ‐‐ differential for women and men. The effect disappears once we control for health insurance, but re‐appears several years after the shock suggesting a differential willingness to save for women and men.

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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