Economic theory says that participants in 401(k) plans should gradually rebalance their portfolios away from stocks and toward less risky bonds as they approach retirement. Conventional target date funds attempt to do so by automatically rebalancing the household’s portfolio periodically, but...

Households that delay claiming Social Security are, in effect, making additional purchases of the Social Security annuity. Theoretical calculations show the delayed claiming is optimal, even for high mortality households. Yet most claim well before the theoretically optimal age. This paper...

As 401(k) plans have largely replaced traditional pensions, baby boomers have become the first generation that must decide how much of their savings to spend each year in retirement. Boomers must find a strategy that best balances the risk of outliving their wealth against the cost of...

Despite the recovery of the stock market since the financial crisis, many retirees have seen significant reductions in their wealth relative to pre crisis expectations and substantial declines in investment income due to very low short-term interest rates. What really matters, though, is the...

Medical and long-term care costs represent a substantial uninsured risk for most retired households. In 2007, spending on Medicare premiums and copayments among married couples age 65 and over averaged $7,600. But such statistics are of limited value to households trying to determine how much to...

Using the Lee-Carter mortality model, we quantify aggregate mortality risk, the risk that annuitants might live longer than predicted by the model. We calculate that a markup of 4.3 percent on an annuity premium, or else shareholders’ capital equal to 4.3 percent of the expected present value...

This paper investigates the impact on labor supply of changes in the Social Security earnings test in 1996 and 2000. We highlight how the persistence of labor supply choices influences both responses to policy changes and the estimation of such responses. We do this in two ways. First, we use...

Estimates of the expected present value of lifetime out-of-pocket medical costs from age 65 onward are of limited value to households managing wealth decumulation in retirement. Their risk characteristics may differ from the average. They will also care about the whole probability distribution...

Medical and long-term care costs represent a substan­tial uninsured risk for most retired households. A recent brief from the Center for Retirement Research at Boston College reported new findings on average lifetime health care costs at selected ages and on the distribution of those costs....

Using data from the Health and Retirement Study, we compare actual inheritances received during the period 1994 to 2004 with the amounts that, in 1994, households anticipated receiving within 10 years. We find little evidence of systematic forecasting errors. The factors affecting inheritance...