Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study

44 Pages Posted: 13 Jul 2000 Last revised: 20 Jan 2022

See all articles by James F. Moore

James F. Moore

Pacific Investment Management Company (PIMCO)

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Date Written: October 1997

Abstract

Low saving rates raise questions about Americans' ability to maintain consumption levels in old age. Using the Health and Retirement Study, this paper explores asset holdings among a nationally representative sample of people on the verge of retirement. Making reasonable projections about asset growth, we assess how much more people would need to save in order to preserve consumption levels after retirement. We find that the median older household has current wealth of approximately $325,000 including pensions, social security, housing, and other financial wealth, an amount projected to grow to about $380,000 by retirement at age 62. Nevertheless, our model suggests that this median household will still need to save 16% of annual earnings to preserve pre-retirement consumption. For retirement at age 65, assets are expected to be about $420,000 and required additional saving totals 7% of earnings per year. These summary statistics conceal extraordinary heterogeneity in both assets and saving needs in the older population. Older high wealth households have 45 times more assets than the poorest decile and this disparity increases with age. There are also large differences in prescribed saving targets, ranging from 38% of annual earnings for those in the lowest wealth decile to negative rates for the wealthiest decile.

Suggested Citation

Moore, James F. and Mitchell, Olivia S., Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study (October 1997). NBER Working Paper No. w6240, Available at SSRN: https://ssrn.com/abstract=225998

James F. Moore (Contact Author)

Pacific Investment Management Company (PIMCO)

840 Newport Center Drive
Suite 100
Newport Beach, CA 92660
United States

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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