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Working Paper
Set it and Forget it? Financing Retirement in an Age of Defaults
Retirement savings abandonment is a rising concern connected to defined contribution systems and default enrollment. We use tax data on Individual RetirementAccounts (IRAs) to establish that for a recent cohort, 0.4% of retirement-age individuals abandoned an aggregate of $66 million, proxied by a failure to claim over ten years after a legal requirement to do so. Analysis of state unclaimed property databases suggests that workplace defined contribution plans are abandoned at a higher rate than IRAs. Finally, regression discontinuity estimates show that certain accounts created by default ...
Working Paper
Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden
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 ...
Spurring Americans to Build Their Nest Egg
Research by Brigitte Madrian, dean at the Brigham Young University Marriott School of Business, helped expand enrollment in 401(k) programs.
Journal Article
Interview: Annamaria Lusardi
Annamaria Lusardi "fell in love" with economics, she says, thanks to a macroeconomics course she took as an undergraduate at Bocconi University in her native Italy. But her career has been focused on a quite different topic — she's a leading researcher in personal finance. How good are the skills and information that individuals bring to their financial decisions? And how can institutions provide them with the skills to make better decisions? These are the questions that have been preoccupying her for the past several decades, most recently as University Professor at George Washington ...
Working Paper
Breaking the Implicit Contract: Using Pension Freezes to Study Lifetime Labor Supply
This paper studies the elimination of traditional pensions and subsequent adoption of 401(k) plans by U.S. employers. Using thousands of firm-level natural experiments, it shows that unexpected losses in future compensation engendered by pension plan transitions induce premature retirement for some workers and delayed retirement for others. Observed heterogeneity in retirement behavior is indicative of differences in wealth and in preferences for leisure. Using credibly identified treatment effects as estimation targets, it fits a structural model of retirement and uses the model to evaluate ...