Wealth Dynamics during Retirement: Evidence from Population-Level Wealth Data in Sweden

Martin Ljunge, Lee Lockwood, Dayanand S. Manoli

NBER Retirement Research Center Paper No. NB 14-06
Issued in September 2014

In this paper, we document the wealth dynamics of retirees in Sweden. We focus on periods surrounding changes in household composition, due to divorce or spousal death. We find patterns similar to the case of the US, as documented by Poterba et al. (2011). In particular, during periods in which household composition remains unchanged wealth declines slowly, if at all, whereas periods in which household composition changes are characterized by large declines in wealth. The similarity of these patterns of wealth evolution during retirement in Sweden to those documented in the US is somewhat surprising given the large differences in these countries’ institutions, especially the extent of coverage of long-term care costs. These findings suggest that the large declines in assets around the time of spousal death in the US documented by Poterba et al. (2011) are unlikely to be entirely driven by increased medical expenditure around that time, and that even the apparently quite comprehensive social insurance programs in Sweden may not completely insure retirees against household composition shocks.

PDF (720 K)Executive Summary (60 K)