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Key Findings Details

Couples' and Singles’ Savings After Retirement
Mariacristina De Nardi, Eric French and John Bailey Jones
WP 2015-322

· We develop a model of optimal lifetime decision making and estimate key properties of the model. We find that singles live less long than people who are part of a couple, but are more likely to end up in a nursing home in any given year. For that reason, singles also have higher medical spending, per person, than people who are part of a couple.

· We also find that assets drop sharply with the death of a spouse. By the time the second spouse dies, a large fraction of the wealth of the original couple has vanished, with the wealth falls at the time of death of each spouse explaining most of the decline.

· A large share of these drops in assets is explained by the high medical expenses at the time of death. This suggests that a large fraction of all assets held in retirement are used to insure oneself against the risk of high medical and death expenses.