Why Do Couples and Singles Save During Retirement?
While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives.
We thank Wilbert van der Klaauw, Monica Costa Dias, Tom Crossley, Ami Ko, Melanie Luhrmann, Tatyana Koreshkova, Victor Rios-Rull and many seminar participants for helpful comments and Karolos Arapakis, Justin Kirschner, Jeremy McCauley, Ali Merali and Rachel Rodgers for research assistance. We gratefully acknowledge support from NSF grant SES-2044748, the Social Security Administration through the Michigan Retirement Research Center (MRRC grant UM17-15), the Economic and Social Research Council (Centre for Microeconomic Analysis of Public Policy at the Institute for Fiscal Studies (RES-544-28-50001), and Grant Inequality and the insurance value of transfers across the life cycle (ES/P001831/1)). The views expressed in this paper are those of the authors and not necessarily those of the National Bureau of Economic Research, the Federal Reserve Bank of Minneapolis, the Federal Reserve Bank of Richmond, the IFS, the CEPR. or the National Bureau of Economic Research.