Abstract
This paper used seven waves of data from the US Health and Retirement Study to investigate the impact of expectations regarding the timing of retirement on pre-retirement wealth accumulation of married households. More specifically, the effect of married individuals’ subjective beliefs of working full time after age 62 on household wealth was analyzed. Individuals’ perceptions of the usual retirement age on the job was used as an instrument for their subjective beliefs of working full time after age 62. On a whole, the point estimates suggested that the responsiveness of married mens’ saving behavior to retirement dates expectations was larger than that of married women. In particular, wealth of married households where men had the bargaining power in terms of being sole earners, exhibited the largest decrease in response to increases in subjective probabilities of working past age 62.
Notes
Lundberg and Ward-Batts (2000) found only a very weak positive relationship between women having the bargaining power in marriage, and greater wealth accumulation.
See Bloom et al. (2007) who instrumented for survival probabilities to eliminate any focal point, or inconsistency problem.
Some studies have inserted a dampening factor, \(\theta\), such that the function is given by \(g(x,\theta )= log(\sqrt{\theta x^{2}+1}+\theta x)/ \theta\). This paper follows studies such as Kapteyn and Pannis (2003) and others, and set \(\theta =1.\)
An F-stat very close to or above 10 would indicate that an instrument is strong.
In particular the F-stats in the first stage regressions with “usual” in continuous form were: 5.02 ( husband-dual earner), 1.84 (wife-dual earner), 0.09 (husband-sole earner), 0.16 (wife- sole earner).
Such selection would be a problem for the validity of our instrumentation technique.
The Null hypothesis is that the instrument is weak. An F-stat close to or above 10 indicates that there is no problem of a weak instrument.
Or, equivalently, a one percentage point increase in the subjective probability of working past age 62 resulted in a 1.7 percentage point decrease in household wealth. We interpret our estmates in terms of a 10 percentage point increase in p62, since it more plausible to expect a change in this variable of the magnitude from 50 to 60 %, say, then from 50 to 51 %.
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The author would like to thank Economic Research Southern Africa for financial support.
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Romm, A.T. The Effect of Retirement Date Expectations on Pre-retirement Wealth Accumulation: The Role of Gender and Bargaining Power in Married US Households. J Fam Econ Iss 36, 593–605 (2015). https://doi.org/10.1007/s10834-014-9413-4
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DOI: https://doi.org/10.1007/s10834-014-9413-4