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Health and Wealth in Early Retirement

Author

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  • Geoffrey L. Wallace
  • Robert Haveman
  • Karen Holden
  • Barbara Wolfe

Abstract

Retirement years are a precarious time for many older Americans. Even if successful in accumulating resources expected to be sufficient to maintain their pre-retirement standard of living, many retirees face unexpected adverse health shocks after retirement. Because of the uncertainty of shocks to physical and cognitive health, there exists the potential for significant deterioration in resource adequacy both at the time of retirement and into the retirement years due to their occurrence. In this study, we select a sample of new retirees constructed from the Health and Retirement Study (HRS) data and follow them during the first decade of their retirement. Using these data, we identify the nature of shocks to physical and cognitive health for which individuals are at risk during their retirement years, and estimate both the absolute and relative risk of these shocks. We then estimate the impact of the occurrence of these shocks on wealth-based measures of retirement adequacy.

Suggested Citation

  • Geoffrey L. Wallace & Robert Haveman & Karen Holden & Barbara Wolfe, 2012. "Health and Wealth in Early Retirement," CEPR Discussion Papers 669, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:669
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP669.pdf
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    References listed on IDEAS

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    1. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
    2. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets," NBER Chapters, in: Explorations in the Economics of Aging, pages 23-69, National Bureau of Economic Research, Inc.
    3. Courtney Coile & Kevin Milligan, 2009. "How Household Portfolios Evolve After Retirement: The Effect Of Aging And Health Shocks," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 226-248, June.
    4. Robert Haveman & Karen Holden & Andrei Romanov & Barbara Wolfe, 2007. "Assessing the maintenance of savings sufficiency over the first decade of retirement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 481-502, August.
    5. Megbolugbe, Isaac & Sa-Aadu, J. & Shilling, James D., 1999. "Elderly Female-Headed Households and the Decision to Trade Down," Journal of Housing Economics, Elsevier, vol. 8(4), pages 285-300, December.
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    Cited by:

    1. Ghimire, Umesh, 2022. "The Impact of Health on Wealth: Empirical Evidence," MPRA Paper 113850, University Library of Munich, Germany.

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