Comprehensive Wealth of Immigrants and Natives
The 1965 Immigration and Nationality Act had a profound impact on the demographic and skill composition of immigrants arriving in the U.S. A large literature has investigated the relative earnings of immigrants and natives, but much less is known about relative wealth accumulation and the preparation of immigrants for retirement. This paper compares the retirement preparation of older immigrants to that of native-born households using an annualized comprehensive measure of available resources. We find that immigrants have less wealth overall, but that they appear to be drawing down resources at a slower rate. We attempt to make sense of the trends in annualized wealth with the help of a lifecycle framework that incorporates uncertain longevity, bequests, risk in retirement resources, as well as endogenous housing wealth. Simulations from the model indicate that it is difficult to match the observed patterns in annualized wealth without the combination of both an explicit bequest motive and an explicit treatment of housing choice. These patterns mask a good deal of heterogeneity, however, in terms of socioeconomic and demographic characteristics. Some of the largest differences within immigrants occur along the margins of race and ethnicity, as well as the number of years since arrival. The evidence suggests that the typical immigrant is relatively well situated in retirement, but that more recent immigrants have low levels of total resources and are likely to have difficulty maintaining adequate levels of spending in retirement.
- Immigrants have lower total wealth than natives but appear to be drawing down resources at a slower pace in retirement.
- These drawdown patterns are consistent with the predictions of a lifecycle model of saving that includes roles for uncertainty in longevity, medical expense risk, bequests, and housing.
- The typical immigrant is relatively well situated in retirement, but that more recent immigrants have low levels of total resources and are likely to have difficulty maintaining adequate levels of spending in retirement.
Love, David, and Lucie Schmidt. 2015. "Comprehensive Wealth of Immigrants and Natives." Ann Arbor, MI. University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2015-328. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp328.pdf
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Paper IDWP 2015-328