This project will examine the life-cycle consumption behavior of households which enter retirement with lower than “normal” wealth. Using the PSID, the project will test whether differences in planning behavior can explain the variation in retirement wealth across households. The key empirical strategy will be to examine the consumption decisions of pre-retired households with low wealth during their working years. In considering different reform proposals for Social Security, knowing the percentage of households that plan for retirement, and the characteristics of those that do not plan, will help to predict the distributional effects of the various policy options.
Grasshoppers, Ants and Pre-Retirement Wealth: A Test of Permanent Income Consumers
Erik Hurst,2005