Health, Education, and the Post-Retirement Evolution of Household Assets
This paper explores the relationship between education and the evolution of wealth after retirement. Asset growth following retirement depends in part on health capital and financial capital accumulated prior to retirement, which in turn are strongly related to educational attainment. These "initial conditions" for retirement can have a lingering effect on subsequent asset evolution. Our aim is to disentangle the effects of education on post-retirement asset evolution that operate through health and financial capital accumulated prior to retirement from the effects of education that impinge directly on asset evolution after retirement. We consider the indirect effect of education through financial resources--in particular Social Security benefits and defined benefit pension benefits--and through health capital that was accumulated before retirement. We also consider the direct effect of education on asset growth following retirement, emphasizing the correlation between education and the returns households earn on their post-retirement investments. Households with different levels of education invest, on average, in different assets, and they may consequently earn different rates of return. Finally, we consider the additional effects of education that are not captured through these pathways. Our empirical findings suggest a substantial association between education and the evolution of assets. For example, for two person households the growth of assets between 1998 and 2008 is on average much greater for college graduates than for those with less than a high school degree. This difference ranges from about $82,000 in the lowest asset quintile to over $600,000 in the highest.
This research was supported by the National Institute on Aging through grant number P01 AG005842, and from the U.S. Social Security Administration through grants #10-M-98363-1-01 and #5 RRC0898400-03 to the National Bureau of Economic Research as part of the SSA Retirement Research Consortium. We are grateful for the comments of two reviewers of the paper and from the editor of the Journal of Human Capital. Poterba is a trustee of the College Retirement Equity Fund (CREF), a provider of retirement income services. The findings and conclusions expressed are solely those of the authors and do not represent the views of SSA, any agency of the Federal Government, TIAA-CREF, or the NBER. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
James M. Poterba
In addition to my role as a faculty member at MIT, I am engaged in a number of outside activities. In the last three years, I have been:
(i) President of the National Bureau of Economic Research, a non-profit organization devoted to economic research (www.nber.org).
(ii) Trustee of the College Retirement Equity Fund (CREF) and independent director of the TIAA-CREF mutual funds (www.tiaa-cref.org).
(iii) Trustee of the Alfred P. Sloan Foundation (www.sloan.org). (since June 2009)
(iv) Member of the Panel of Economic Advisers at the Congressional Budget Office (www.cbo.gov).
(v) Director, the Jeffrey Company and the Jeflion Company. (until June 2010)
(vi) I periodically receive compensation for lectures or presentations. During the last three years, I have received amounts in excess of $500 from each of the following organizations: The Bradley Foundation, Clemson University, the Institute for Fiscal Studies (London), the Investment Company Institute, Queens University, Tulane University, and the University of Rochester.David A. Wise
David Wise received support for this research from the National Institute on Aging, grant numbers P01-AG005842
James Poterba & Steven Venti & David A. Wise, 2013. "Health, Education, and the Postretirement Evolution of Household Assets," Journal of Human Capital, University of Chicago Press, vol. 7(4), pages 297 - 339. citation courtesy of