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Assessing savings sufficiency requires detailed information on both potential retirement benefits and the characteristics of a national sample of older citizens. The analysis uses the Health and Retirement Survey and the New Beneficiary Survey linked to administrative records to assess and compare the saving adequacy of two different cohorts. Specifically, the two groups are compared in terms of their annuitized net wealth (ANW) and ANW relative to the poverty line, as well as the near-poverty line. Results show that the mean wealth levels of both new retiree cohorts rose over time (by about two-thirds for wealth and by half for ANW), but the chance of meeting social adequacy targets has also risen. This shortfall is concentrated increasingly among non-married persons, and those with low human capital and labor force attachment. In other words, vulnerability during the working life appears to persist into retirement.

Pension wealth plays a critical role in older individuals' retirement behavior and financial security. Accordingly, the magnitude and distribution of pension wealth is important in the ongoing debate about whether Baby Boomers have adequate retirement savings. This chapter summarizes the results of a long-term effort to develop an improved calculator to measure defined contribution pension wealth of older Americans, implemented using the Health and Retirement Study. Results show that pension wealth resulting from voluntary saving (and accrued earnings thereon) comprises half of DC pension wealth calculated for HRS respondents with matched summary plan descriptions. These are lower mean estimates of DC pension wealth than previously found, mainly resulting from changes for the wealthiest tail of the pension-wealth distribution. The findings imply that researchers must think more carefully about the economic assumptions underlying pension measures.

This chapter compares retirement expectations, retirement patterns, and expectations of future work across different cohorts of the Health and Retirement Study, including the new cohort of Baby Boomers currently in their late fifties. The Boomers appear more strongly attached to the labor force as they enter their retirement years than were earlier cohorts at the same age. Compared to the preceding birth cohort, they expect to retire nearly one year later, they are 14% more likely to expect to be working full-time at age 65, and they are 21% more likely to expect to work in the future if they are not currently working. These differences are not entirely explained by cohort differences in socioeconomic status, pension incentives, demographics, or health. In all, Baby Boomers may have stronger preferences for work than previous cohorts.

This chapter uses the Health and Retirement Study to describe the relationship between work and health for older persons by age. It examines patterns within a given cross-section and also trends in health at ages 51-56 between 1992 and 2004. Most retirement occurs well before the onset of work-limiting disability, leaving a large reserve of potential for longer worklives. Baby Boomers will likely have to draw on this reserve, yet its health is not demonstrably better than that of persons born a dozen years earlier. Nevertheless, advances in medical care for health conditions that most 51-56 year olds have not yet encountered may still yield better health at older ages for the Boomer cohort.

Prior studies have had difficulty assessing the value of expected pension resources, partly because many workers cannot recollect and report their pension entitlements, and partly because dual-earner couples may be individually (and sometimes jointly) entitled to claims on company pensions. This chapter develops and applies a new way to value pension wealth so as to determine the importance of pension benefits in retiree wellbeing. Pension values are estimated for workers nearing retirement using Health and Retirement Study data. Results indicate a drop in the number of workers with defined benefit plans near retirement, though their average pension values rose. Turning to defined contribution plans, coverage and the average real value of the pensions rose, producing an overall increase in average pension wealth over the period examined. There is no support for the view that pensions are becoming less important for near-retirees.

This chapter asks how well Baby Boomers are protected against later-life health shocks. While exposure to such shocks is relatively high, the realization of risk appears unlikely and relatively little wealth is at risk. Almost one-quarter of the original Health and Retirement Study cohort was uninsured at some point in the six-year window before Medicare eligibility, but only 2% had an uninsured hospitalization in this window. Moreover, the amount at stake for the median uninsured person is relatively low. Since many in this age bracket approach old age in poor financial shape, lack of assets may be a larger problem than lack of health insurance. Policies aimed at preventing poverty among the elderly may be more important than policies to expand health insurance coverage among those on the verge of retirement.

This chapter documents the investment choices of workers outside their company pensions. The Health and Retirement Study is used to evaluate how investment patterns outside pension holdings have been influenced by the shift from defined benefit to defined contribution pensions. Since workers with defined benefit plans can expect steady income in retirement, they might be thought to invest less conservatively outside their pensions. Nevertheless, the data show otherwise. Defined contribution participants also hold stock investments outside their pension portfolios. These findings suggest that increased stock holding as defined benefit plans decline in importance.

This chapter compares the saving behavior of Early Baby Boomers (age 51-56 in 2004) and its predecessor cohort in the Health and Retirement Study (age 51-56 in 1992). Results indicate that the Boomers accumulated more wealth than the previous cohort, largely because they benefited from rising house prices. Nevertheless, some Boomer families are less well off, particularly those headed by those with low education and low income, and minorities. The survey also shows that many Boomers have not planned for retirement, and like the earlier cohort, nonplanners have much less wealth than planners. In other words, lack of planning is tantamount to lack of saving, irrespective of the economic changes observed over the last dozen years.

This chapter evaluates housing wealth and its potential role in Baby Boomers' retirement wellbeing. The Health and Retirement Survey is used to compare Boomers' wealth position to that of the immediately preceding cohort, just prior to retirement. Results show that Boomers have more valuable homes but have also borrowed more against them, so they have a similar fraction of assets allocated to home equity as their predecessors. Unlike prior studies, this chapter shows that people do view housing as a source of wealth that can help them finance their retirement needs. Indeed, a substantial fraction of older households do move and appear to liquidate some home equity in the process. Consequently, some of the recent home equity extraction may be related to the aging of the population rather than a cyclical response to rapid house appreciation.

This chapter documents the substantial decline in traditional sources of longevity insurance, and shows that published statistics on the individual annuity market greatly overstate its size and growth. It considers whether the decline in annuitization rates is a cause for concern. It then documents in more detail the structure, size, and pricing of the individual annuity market, and discusses product innovations. It concludes by discussing policy options for increasing rates of voluntary annuitization.

This chapter explores the likely prevalence of hardship in old age for individuals now nearing retirement. We use longitudinal data from the Health and Retirement Study to determine what observable demographic, socioeconomic, and financial factors in late middle age predicted economic hardship in old age for the cohort nearing retirement in the mid-1990s. These findings are then used to predict economic hardship in old age for the cohort nearing retirement age in the mid-2010s. Our analysis suggests that the more recent cohort is likely to realize higher economic insecurity, particularly among men.

This chapter studies the effects of the Great Recession on the population aged 55+. Households in and near retirement have suffered sizeable losses in assets as a result of the economic crisis. There are a number of ways in which households might respond, including reducing spending, and with that, increasing saving, working longer, and/or bequeathing less. Using longitudinal data from the Health and Retirement Study and its supplemental surveys, the chapter finds that all of these adjustments have been important.

The current retirement environment presents challenges, not only over the period for which interest rates remain low, but also once interest rates appreciably increase. This chapter addresses two related questions: first, how have households responded to the current low interest rate environment, and second, are there alternative responses or investments which households might do well to consider? We employ the Health and Retirement Study to first investigate impacts of the low interest rate on savings, wealth, and asset allocation. We also report on a subset of households who were relatively successful at building and preserving wealth over this period. Following this, we consider alternative portfolio and wealth management strategies targeting increases in equities and delayed claiming of Social Security in terms of their potential to add value in persistent low return environments.

The National Retirement Risk Index shows that more than half of working-age households are at risk of failing to maintain their pre-retirement standard of living in retirement. In contrast, two other studies suggest a more sanguine outlook. One group concludes that most households maintain their consumption immediately upon retirement. A second set of researchers argue that most pre-retirees have accumulated at least an optimal level of retirement wealth. This chapter seeks to reconcile the conflicting evidence on retirement preparedness. Our conclusion is that an optimistic view of US retirement preparedness depends crucially on assumptions about behavior that may not reflect real-world activity or on consumption patterns that are unsustainable in the long run. Thus, our best assessment is that many retirees will fall increasingly short.

This chapter examines the change in the home equity of older families as they age, beginning at ages just before retirement. It uses data from the Health and Retirement Study (HRS), the Asset and Health Dynamics Among the Oldest Old (AHEAD) survey, as well as the Survey of Income and Program Participation (SIPP). It distinguishes changes in housing equity that might be thought of as part of a financial plan to use housing equity as a means of general support in retirement from changes in housing equity that are precipitated by family shocks—death or severe illness. The chapter extends the analysis in Steven Venti and David Wise, in which it was found that in the absence of changes in household structure, most elderly families are unlikely to move. The chapter also shows that even among movers, those families that continue to own typically do not reduce home equity.

The U.S. and much of the developed world are currently undergoing a demographic transition marked by fundamental changes in the age structure of the population. These changes pose a number of challenges for society such as understanding the consumption patterns of middle aged and older people. In this chapter, the authors use data from the Health and Retirement Study to explore consumption patterns among five cohorts of adults age 50 and older. They found that older, compared to younger, birth cohorts of older adults reported less spending on food, transportation, trips and vacations, and durable goods; they spent more on donations and gifts; all cohorts reported similar levels of spending on health-related expenses. Results also identified a critical middle age group (i.e. ages 70 to 80), in which the greatest differences in consumption patterns were evident. Such findings may be useful for industry and organizations allowing them to be responsive and competitive by helping them target goods and products that meet the changing needs of an aging society

The chapter analyzes the magnitude, variation, persistence, and composition of out-of-pocket medical expenditures among older households. It highlights the extent to which high out-of-pocket burdens represent temporary financial shocks, such as from a more sudden acute illness, or persistent financial burdens, such as from a long-term chronic illness. The chapter also adds perspective on the broader changes in finances that are likely to affect individuals in the period leading up to death, and that may explain changes in asset holdings that are larger than out-of-pocket spending for health care. The chapter takes a note of transfers to children, charitable donations, perhaps travel, and lost earnings (by self or spouse) as illustrations of how asset profiles might be altered by terminal illness.

This chapter explains variables regarding intergenerational transfers in three Korean data sets and compares them with those in a Health and Retirement Study (HRS), which is an elderly panel data set. It is found that two or three out of five Korean households in the study provided some type of financial support for their aged parents. In the face of rapid population aging and prevailing individualism, the social norm for supporting the elderly is changing from transfers to self-responsibilities. As such, individuals might have to consider longevity risk as well as keeping a balance between savings for their old age and spending on their children, and investing in their own human capital. Before introducing new welfare programs, the existence and magnitude of latent demands for the service and potential crowding-out effect of the program on private sectors should be accounted for and measured in a reasonable way.

This paper estimates the lifetime risk and distribution of stays in nursing homes using 10 waves of data from the Health and Retirement Study covering the population over the age of 50. Using both nonparametric and parametric approaches which account for censoring, we estimate that a 50 year old has a 53% to 59% chance of ever entering a nursing home before he dies and that, conditional on any stay, the average duration is just over a year. We show that stays at the end of life which are typically not captured in core interviews are very important for assessing lifetime exposure. The HRS performs exit interviews with proxies for those who died. Excluding exit interviews yields lifetime risk under 40%. Being female, white and a nonsmoker are associated with higher lifetime risk due to lower (competing) mortality risk and higher nursing home risk at older ages.