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  3. Journal of Economic Perspectives
  4. Fall 2011
  5. The Composition and Drawdown of Wealth in Retirement

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

The Composition and Drawdown of Wealth in Retirement

  • James Poterba
  • Steven Venti
  • David Wise
Journal of Economic Perspectives
vol. 25, no. 4, Fall 2011
(pp. 95–118)
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Abstract

This paper presents evidence on the resources available to households as they enter retirement. It draws heavily on data collected by the Health and Retirement Study. We calculate the "potential additional annuity income" that households could purchase, given their holdings of non-annuitized financial assets at the start of retirement. We also consider the role of housing equity in the portfolios of retirement-age households and explore the extent to which households draw down housing equity and financial assets as they age. Because home equity is often conserved until very late in life, for many households it may provide some insurance against the risk of living longer than expected. Finally, we consider how our findings bear on a number of policy issues, such as the role for annuity defaults in retirement saving plans.

Citation

Poterba, James, Steven Venti, and David Wise. 2011. "The Composition and Drawdown of Wealth in Retirement." Journal of Economic Perspectives 25 (4): 95–118. DOI: 10.1257/jep.25.4.95

JEL Classification

  • D14 Personal Finance
  • D31 Personal Income, Wealth, and Their Distributions
  • J26 Retirement; Retirement Policies