Comparing Retirement Wealth Trajectories on Both Sides of the Pond

Abstract

We use comparable data from the U.S. and England to examine similarities and differences in the level and trajectories of assets among households age 70 and older. We find that in the U.S. assets, on average, decline gradually with age, while in England, older households actually accumulate wealth. These differences appear to be driven largely, though not entirely, by housing wealth: During the period we consider, house price growth drove increases in housing wealth in England that more than offset the slow drawdown of nonhousing wealth. This suggests the illiquid nature of housing is likely to be an important factor in explaining wealth drawdown at older ages. We also consider the potential importance of bequest motives and savings to insure against the risk of medical and long-term care expenses.

Longitudinal Determinants of End-of-Life Wealth Inequality

“…It supports a number of earlier studies, including Blundell, Crawford, French, and Tetlow (2016), DiNardi, French, and Jones (2016), and Love, Palumbo, and Smith (2009), that find relatively slow drawdown of wealth after retirement. These results underscore the importance of including bequest motives, precautionary saving motivated by stochastic late-life expenditure needs, or other factors that can rationalize the slow draw-down of wealth in models that explain post-retirement wealth dynamics.…”

Savings After Retirement: A Survey

“…Blundell et al [11] show that the homeowership rate falls from 75% to 60% between ages 70 and 90. Regarding downsizing, Banks et al [9] show that many retired Americans sell their home and use the proceeds to purchase a smaller home, although this is much less common in England.…”

“…In most countries, people run down their non-housing wealth more quickly than their housing wealth (Nakajima and Telyukova [81], Blundell et al [11]).…”

“…For example, Blundell et al [11] show that between 2002 and 2012 the median non-housing wealth of elderly US households declined by close to 50% (Figure 11, panel a, circle-dash line), whereas median housing wealth declined by about 30% (Figure 11, panel b, circle-dash line). During the same period in England, the elderly ran down their non-housing wealth by 25% ( Figure 11, panel a, solid line), but increased their housing wealth by 40% (panel b).…”

Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden

“…Examples are Nakajima and Telyukova (2016), a companion paper in which we describe cross-country differences in housing in retirement across 12 countries, Angelini et al (2011), who characterize homeownership throughout the life cycle using the retrospective SHARELife survey, and Christelis et al (2013), who characterize differences in the composition of entire household portfolios in a previous wave of the data that we use, and decompose the reasons for these differences into influences of institutions versus household characteristics. Blundell et al (2016) compare the asset decumulation patterns of U.S. and U.K. households.…”