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This chapter looks at how Social Security, 401(k) participation, and other asset accumulation fit together for households with different lifetime earnings and different Social Security wealth accumulations. Two broad categories of wealth are focused upon: dedicated retirement assets, which are made up of Social Security wealth, accrued benefits in traditional pension plans, 401(k) savings, and IRAs and Keogh plans; and undedicated assets, including nonretirement financial savings and housing equity. 401(k) participation varies substantially by income, broader measures of retirement assets show a “retirement replacement rate” (inclusive of both Social Security and retirement saving) and a “total saving rate” (including both dedicated and undedicated assets) that varies only moderately by lifetime earnings and by Social Security wealth. Combining projections of 401(k) assets with estimated Social Security wealth, the study finds that the combined rate of growth is surprisingly similar across earnings deciles, and translates to at least a doubling of retirement resources in most earnings and Social Security wealth deciles. The growth rate is lower in the bottom two deciles of lifetime earnings. These various results are indicative of a very dramatic shift in the landscape of financial resources available to retirees in the future.

In a previous study, the authors of this chapter evaluated the extent to which the different wealth accumulation of households with similar lifetime earnings could be accounted for by random shocks, such as health status and inheritances, that could reduce or increase the available resources out of which saving could be drawn. They concluded that only a small fraction of the dispersion in wealth accumulation within lifetime earnings deciles could be accounted for by random shocks, and thus that most of the dispersion could be attributed to choice; some people save while young, others do not. This chapter continues that analysis but with two additions: first, it evaluates the effect of investment choice on the accumulation of assets — in particular, how much of the dispersion in wealth can be accounted for by the choice between investment in the stock market and investment in presumably less risky assets such as bonds or bank saving accounts. Second, it attempts to understand the relationship between asset accumulation and individuals' assessment, just prior to retirement, of the adequacy of their saving and their saving behavior. The results indicate that the bulk of the dispersion in wealth at retirement results from the choice of some families to save while other similarly situated families choose to spend. For the most part, controlling for lifetime earnings, persons with little saving on the eve of retirement have simply chosen to save less and spend more over their lifetimes. Families with modest lifetime earnings would have accumulated substantial wealth had they saved consistently and invested prudently over the course of their working lives.

This chapter discusses the effect of differences in the levels of skills, education and childbearing on the lifetime earnings of women in partnerships in the UK. Using simulated data for the earnings of couples, and making assumptions about gender roles, the chapter shows that women with higher skill levels are able to maintain levels of lifetime earnings approaching those of men whether or not these women have children. On the other hand, women with lower skill levels have the tendency to face lower lifetime earnings than men, specifically if they have children. This has serious implications for women's financial well-being if they face marital and relationship dissolution.

This chapter examines whether the rates of return on medical education in general and specialty training in particular are excessive, and whether they affect career choices in medicine. It discusses the importance of money in medical career decisions: the extent to which college graduates enter medicine because it pays well and the degree to which they choose a specialty based on expected lifetime earnings. It also considers the key features of the market for training new physicians in the United States and proposes a simple conceptual model to determine how students decide whether to enter medicine and which specialty to choose on completion of medical education.

This chapter explores the question of whether a late transition into adulthood reduces the lifetime economic opportunities of individuals. Italians provide a case study in economic demography. Their fertility rate is among the lowest in the world. Italian men study longer or at least complete college later, they enter the labor force later, and they leave the parental home later than men in any other developed country in the world. It is not unusual for Italian men to live with their parents late into their twenties and sometimes into their thirties. The chapter summarizes the situation by characterizing Italian men as entering adulthood later than men in other countries. They start all adult activities at a much later age than is common in other countries at comparable levels for development, from working, to living alone, to marrying, to having children. This chapter looks at whether this lateness reduces the lifetime economic opportunities of individuals or not. The chapter examines survey data for Italians in their mid-thirties. The key finding is that the age of leaving the parental home is quite important in terms of earnings several years later.