How Will Retirement Saving Change By 2050? Prospects for the Millennial Generation

Gale, William G.; Gelfond, Hilary; Fichtner, Jason J.

doi:10.2139/ssrn.3385522

Cited by 11 publications

(14 citation statements)

References 41 publications

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“…This literature yields varying conclusions about the overall level of retirement preparedness, with many of the differences owing to conceptual issues (Gale et al 2018). For example, some papers consider retirement savings to be adequate if individuals can expect to experience the average standard of living that they enjoyed during their younger years while others judge savings to be adequate only if individuals can expect to live at the standard of living they experienced in the years immediately preceding retirement (which is likely to be higher given productivity growth in the economy).…”

Section: Past Research On Economic Security In Retirementmentioning

confidence: 99%

“…Moreover, changes in the economic and demographic profile of the population mean that future cohorts of the elderly will face a different landscape in terms of economic security risks (Gale et al 2018). Some factors will enhance their economic security compared with earlier generations-higher female labor force participation rates and greater real Social Security benefits, for example.…”

Section: Introductionmentioning

confidence: 99%

“…The elderly are also at greater risk for catastrophic health care expenses related to physical disability and dementia. And the elderly, having largely left the labor force, have fewer ways to address economic vulnerabilities than younger individuals.Moreover, changes in the economic and demographic profile of the population mean that future cohorts of the elderly will face a different landscape in terms of economic security risks (Gale et al 2018). Some factors will enhance their economic security compared with earlier generations-higher female labor force participation rates and greater real Social Security benefits, for example.…”

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confidence: 99%

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The Risk of Financial Hardship in Retirement: A Cohort Analysis

2019

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This paper explores the likely prevalence of hardship in old age for individuals now nearing retirement. We use two decades of longitudinal data from the Health and Retirement Study to determine what observable demographic, socioeconomic, and financial factors in late middle age predicted economic hardship in old age for the cohort that was nearing retirement age in the mid-1990s. It then uses these findings to predict economic hardship in old age for the cohort nearing retirement age in the mid-2010s. Our analysis suggests that the more recent cohort is likely to realize higher economic insecurity, particularly among men. AbstractThis paper explores the likely prevalence of hardship in old age for individuals now nearing retirement. We use two decades of longitudinal data from the Health and Retirement Study to determine what observable demographic, socioeconomic, and financial factors in late middle age predicted economic hardship in old age for the cohort that was nearing retirement age in the mid-1990s. It then uses these findings to predict economic hardship in old age for the cohort nearing retirement age in the mid-2010s. Our analysis suggests that the more recent cohort is likely to realize higher economic insecurity, particularly among men.The economic security of current and future generations of the elderly is a leading public policy concern, particularly as the population of the elderly soars in the United States. The elderly appear to be more economically secure than other age groups by some metrics. According to the Federal Reserve Board's Survey of Consumer Finances (SCF), median net worth for the age 75 and older population, at $265,000 in 2016, was higher than for all other age groups and also at an all-time high (in inflation-adjusted terms). Moreover, the social safety net provides considerably more protection for the elderly than other age groups through Medicare, Medicaid, SNAP, SSI, and other programs. Yet, other considerations point to greater risks facing the elderly. The poverty rate falls with age before age 65 but rises thereafter. The elderly are also at greater risk for catastrophic health care expenses related to physical disability and dementia. And the elderly, having largely left the labor force, have fewer ways to address economic vulnerabilities than younger individuals.Moreover, changes in the economic and demographic profile of the population mean that future cohorts of the elderly will face a different landscape in terms of economic security risks (Gale et al. 2018). Some factors will enhance their economic security compared with earlier generations-higher female labor force participation rates and greater real Social Security benefits, for example. Yet future generations of the elderly will also confront challenges relative to their earlier counterparts: longer life expectancies to finance and possibly lower rates of return on assets, for example. The balance sheets of today's near elderly also suggest that they are less financially prepared for the years to come than earlie...

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Section: Past Research On Economic Security In Retirementmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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The Risk of Financial Hardship in Retirement: A Cohort Analysis

2019

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“…Further, we consider a wider range of circumstances than the two (productivity growth and social security) examined by Kapteyn et al (2005). Gale et al (2019) consider the prospects for the adequacy of the retirement incomes and wealth accumulation of millenials in the US, and how their circumstances and outcomes may compare to older generations. They consider a similar set of changing circumstances to those analysed in this paper, including, earnings, rates of return, the tax and benefits system and the timing of children, but rather than quantify the impact of each factor in a model, they describe and discuss the implications of each qualitatively.…”

Section: Figure 1: Median Wealth By Age For Selected Generationsmentioning

confidence: 99%

Should generations differ in their wealth accumulation?

Crawford¹,

Sturrock²

2019

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In the UK, those born between the 1930s and 1950s have seen generation-ongeneration increases in wealth, while those born more recently appear to have accumulated no more wealth than their predecessors had done by the same age. There is debate over the drivers, and therefore implications, of these trends. We use a heterogeneous agents lifecycle model to quantify the potential importance of changing economic and demographic circumstances for the wealth accumulation of generations. Using generation-specific inputs to our model, we examine the impact of differences in earnings, household composition, life expectancy, retirement ages, the tax and benefit system, the state pension system and rates of return on assets. Several of these factors have quantitatively important implications for the level and distribution of wealth, saving rates and replacement rates. We find that changing circumstances alone could generate a picture of stalling wealth accumulation among later generations-one does not need to appeal to differences in preferences between generations. Furthermore, our simulations indicate that given the circumstances they face, later born generations would need higher saving rates even to achieve lower replacement rates in retirement than their predecessors.

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“…Documenting and determining the causes of changes in the level and distribution of household wealth and its components across generations and over time is an extraordinarily ambitious goal. This paper takes several initial steps in that general direction, building on Gale and Pence (2006), Gale, Gelfond, and Fichtner (2019) and Gale and Harris (2020) and using data from the 1989 to 2016 waves of the Federal Reserve Board's Survey of Consumer Finances (SCF). We obtain several key results.…”

Section: Introductionmentioning

confidence: 99%