The saving patterns of retired US 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 life span risk can explain a significant portion of US saving during retirement. However, more work is needed to distinguish these precautionary saving motives from other motives, such as the desire to leave bequests. Progress toward disentangling these motivations has been made by matching other features of the data, such as public and private insurance choices. An improved understanding of whether intended bequests left to children and spouses are due to altruism, risk sharing, exchange motivations, or a combination of these factors is an important direction for future research.
|Original language||English (US)|
|Number of pages||28|
|Journal||Annual Review of Economics|
|State||Published - Oct 31 2016|
Bibliographical noteFunding Information:
M.D. gratefully acknowledges support from European Research Center grant 614328 Savings and Risks and from the Economic and Social Research Council through the Center forMacroeconomics. E.F. gratefully acknowledges support from the Social Security Administration through the Michigan Retirement Research Center grant UM14-05. We are grateful to Richard Blundell, Cormac O'Dea, Rory McGee, Svetlana Pashchenko, Chris Tonetti, and our referees for comments and suggestions
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