Couples’ and Singles’ Savings After Retirement

Published: 2015


We model the saving problem of retired couples and singles facing uncertain longevity and medical expenses in presence of means-tested social insurance. Households can save to self-insure against uncertain longevity and medical expenses, and to leave bequests. Individuals in a couple can be altruistic towards their spouse and other heirs and split bequests optimally. Single people can care about leaving bequests to children and others. Using AHEAD data, we first estimate the model and we then evaluate the relative importance of the various savings motives and the risk exposure of couples’ versus singles.

Key Findings

    • We develop a model of optimal lifetime decision making and estimate key properties of the model. We find that singles live less long than people who are part of a couple, but are more likely to end up in a nursing home in any given year. For that reason, singles also have higher medical spending, per person, than people who are part of a couple.
    • We also find that assets drop sharply with the death of a spouse. By the time the second spouse dies, a large fraction of the wealth of the original couple has vanished, with the wealth falls at the time of death of each spouse explaining most of the decline.
    • A large share of these drops in assets is explained by the high medical expenses at the time of death. This suggests that a large fraction of all assets held in retirement are used to insure oneself against the risk of high medical and death expenses.


De Nardi, Mariacristina, Eric French, and John Bailey Jones. 2015. "Couples' and Singles’ Savings After Retirement." University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2015-322. Ann Arbor, MI.