Savings Adequacy and Retirement Expectations Among Older Married Couples

Recent work on retirement age expectation formation of older Americans shows that people on average form expectations rationally (Benítez-Silva and Dwyer, 2003a) Over time, individuals efficiently incorporate uncertainty over their own health and socio-economic situation, as well as their spouse’s, as they plan their retirement dates. We propose to analyze how they incorporate uncertainty over possible reforms of the social insurance programs, and the implications for saving behavior. If people are rationally planning when they would like to retire, what are their consumption and savings patterns during this planning stage? We plan to use the models we have developed on retirement expectations to examine how individuals and couples save under current policies, and the impact of potential reform. Rather than simulating reform on actual retirement behavior, we incorporate change in a model of expectations. How will uncertainty over reform affect their plans and their current behavior? Retirement is the result of a lot of planning, and focusing on how reform and uncertainty affects the planning stage is one of the keys to understand the real effects of reform, and the heterogeneity observed at the time of actual retirement in terms of age structure and resources available