(UM06-18) - Health Risk in Retirement and Retirement Wealth
Purvi Sevak and Lina Walker
With the approaching retirement of the baby boom cohort and concerns about the solvency of Social Security, there has been growing interest
in understanding savings behavior. Being able to characterize the
underlying motivation for savings will be important to researchers and
policy makers as they evaluate the effect of different Social Security
reform proposals on the savings and consumption of future retirees.
This project focuses on the largest uninsured health risk currently
faced by the elderly – nursing home expenses. Using data from the
Survey of Consumer Finances and the Health and Retirement Study, the
research will examine the extent to which working-aged households
self-insure against the risk of out-of-pocket nursing home expenses.
The findings will allow policymakers to address two important
questions that have surfaced in the current debate over Social
Security reform. The first: are households forward-looking and do they
save for an event well into the future? Second: do households account
for future risks when making saving decisions? Answers to these
questions will provide a framework for policy-makers when evaluating
Social Security reform proposals. In addition, because savings
behavior might be affected by the interaction of reform related risk
and existing risks, the impact of any new risk should be evaluated
within the context of current risk. This research provides the
necessary first steps towards that end.