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How Accurate are Expected Retirement Savings?

Author

Listed:
  • Steven Haider

    (Michigan State University)

  • Mel StephensJr.

    (Carnegie Mellon University and NBER)

Abstract

This paper examines the ability of workers nearing retirement to report their expected retirement savings, where retirement savings refers to funds held in savings, checking, and investment-type accounts. Responding to such a question is likely to be difficult, even for those who are near retirement, because it requires respondents to assess when they will retire, their likely income stream between the survey date and retirement, and what portfolio choices will be made at retirement. Based on two nationally representative surveys collected two decades apart, we find that most individuals provide some response to the question, particularly when they are allowed to provide a range. Moreover, the responses that are given have substantial predictive power for actual retirement savings, even when compared to the savings in the initial wave. Despite this predictive power, there is evidence that responses do not satisfy the more stringent requirements of the rational expectations hypothesis.

Suggested Citation

  • Steven Haider & Mel StephensJr., 2006. "How Accurate are Expected Retirement Savings?," Working Papers wp128, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp128
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    References listed on IDEAS

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    Cited by:

    1. Purvi Sevak & Lucie Schmidt, 2011. "Macroeconomic Conditions and Updating of Expectations by Older Americans," Working Papers wp259, University of Michigan, Michigan Retirement Research Center.
    2. Pierre-Carl Michaud & Arthur vanSoest, 2006. "How Did the Elimination of the Earnings Test Above the Normal Retirement Age Affect Retirement Expectations?," Working Papers wp135, University of Michigan, Michigan Retirement Research Center.
    3. Bissonnette, L. & van Soest, A.H.O., 2010. "Retirement Expectations, Preferences, and Decisions," Other publications TiSEM 45e93b08-cc1d-47c6-ba06-d, Tilburg University, School of Economics and Management.

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