Why Do Couples and Singles Save During Retirement?

Abstract

While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and highincome singles and generate transfers to nonspousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives.

Managing Retirement Incomes

“…There is an extensive literature that has examined overall wealth trajectories in retirement. In contrast to what would be predicted by the simplest life cycle model, households typically use their accumulated resources slowly in retirement and hold large amounts of wealth into very old age (Love et al, 2009;Poterba et al 2011;De Nardi, French and Jones (2010), Blundell et al 2016;De Nardi et al (2021)). Figure 5 illustrates this for the US and England.…”

Consumption and Saving after Retirement

“…De Nardi et al (2021) have recently considered the case of couples, using a unitary household model to analyze data from the AHEAD component of the U.S. Health and Retirement Survey. The analysis focuses on the importance of late-life medical expenses, and the interaction between bequest motives and precautionary savings motives.…”