Savings Between Cohorts: the Role of Planning

Published: 2006


We compare the saving behavior of two cohorts: the Early Baby Boomers (EBB, age 51-56 in 2004) and the HRS cohort (age 51-56 in 1992). We find that EBB have accumulated more wealth than the previous cohort but they benefited from a large increase in house prices, which lifted the wealth of many home-owners. In fact, there are many families among EBB, particularly those headed by respondents with low education, low income, and minorities, which have less wealth than the previous cohort. Lack of wealth can be traced to lack of retirement planning. Notwithstanding the many initiatives aimed at fostering planning in the 1990s, a large portion of EBB still do not plan for retirement even though most respondents are close to it. The effect of planning is remarkably similar between the two cohorts; those who do not plan accumulate much lower amounts of wealth –from 20 to 45 percent depending on the location in the wealth distribution- than those who do plan. Thus, for both the EBB and the HRS cohort, lack of planning is tantamount to lack of saving irrespective of the many changes in the economy between 1992 and 2004.

Key Findings

    • Comparing Early Baby Boomers (EBB), age 51-56 in 2004, with the HRS cohort, age 51-56 in 1992, EBB have accumulated more wealth, but this largely because of housing inflation. Those with low education, low income, and non-white in the EBB have actually accumulated much less than the previous cohort.
    • The EBB are not more likely to plan for retirement despite increases in education efforts in the 1990s.
    • Effects of planning are the same for both cohorts:. Those who do not plan accumulate much less wealth.


<P class="MsoNormal"><SPAN>This MRRC working paper was subsequently published as:</SPAN><SPAN></SPAN></P> <P>Lusardi, Annamaria, Beeler, Jason, “Explaining Saving Behavior Between Cohorts: The Role of Planning.” B. Madrian, O. Mitchell, and B. Soldo (eds.), Redefining Retirement: How Will Boomers Fare? <U>Oxford University Press</U>, 2007. </P>