Abstract
This paper introduces a model of retirement wealth choice. Reservation wealth is defined as the level of wealth at which an individual is indifferent between retiring and not retiring. Economic theory is used to generate hypotheses concerning how an individual's characteristics determine his or her reservation wealth. An econometric strategy is outlined for estimating these determinants, given that reservation wealth is not directly observed. This strategy is then employed using the 1992 Survey of Consumer Finances. The findings imply that individuals respond fairly conservatively, with respect to their retirement planning, to changes in their income. It is also found that married men and women choose their reservation wealth in very different ways.
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Hatcher, C.B. Wealth, Reservation Wealth, and the Decision to Retire. Journal of Family and Economic Issues 23, 167–187 (2002). https://doi.org/10.1023/A:1015738717484
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DOI: https://doi.org/10.1023/A:1015738717484