NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wealth Dynamics and Active Saving at Older Ages

Michael D. Hurd, Susann Rohwedder


This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Improving the Measurement of Consumer Expenditures, Christopher Carroll, Thomas Crossley, and John Sabelhaus, editors
Conference held December 2-3, 2011
Forthcoming from University of Chicago Press
in NBER Book Series Studies in Income and Wealth

According to the simple lifecycle model single persons are predicted to decumulate assets at advanced age, when mortality risk is high, to reduce the risk of dying with substantial wealth. Empirically it has been difficult to show this prediction in micro data. In this chapter we discuss the most common limitations in existing data. We present lifecycle patterns of dissaving based on two very different kinds of data: those that are derived from wealth change, and those derived from measures of active saving defined as disposable income minus consumption. Based on wealth change we find substantial dissaving by single persons, but not by couples: apparently couples preserve wealth to provide for the surviving spouse. Active saving by single persons is negative implying wealth decumulation, but the predicted rate of wealth decline is smaller than the rate of observed wealth decumulation. Active saving by couples is positive. We discuss possible reasons for the discrepancy between active saving and wealth change, including under-estimation of consumption, mis-measurement of taxes, and capital gains.

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This paper was revised on March 1, 2013

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