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Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute
Working Papers
Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden
Makoto Nakajima
Irina A. Telyukova
Abstract

Many U.S. households have significant wealth late in life, contrary to the predictions of a simple life-cycle model. In this paper, we document stark differences between U.S. and Sweden regarding out-of-pocket medical and long-term-care expenses late in life, and use them to investigate their role in discouraging the elderly from dissaving. Using a consumption-saving model in retirement with significant uninsurable expense risk, we find that medical expense risk accounts for a quarter of the U.S.-Sweden difference in retirees' dissaving patterns. Furthermore, medical expense risk affects primarily financial assets, while its impact on housing is limited.


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Makoto Nakajima & Irina A. Telyukova, Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden, Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute, Working Papers 8, 10 Apr 2018.
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Subject headings:
Keywords: Household finance; Aging; Retirement saving; Health; Cross-country analysis
DOI: 10.21034/iwp.8
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