DP16155 Why Do Couples and Singles Save During Retirement?

Author(s): Mariacristina De Nardi, Eric Baird French, John Bailey Jones, Rory McGee
Publication Date: May 2021
Keyword(s): bequest motives, Couples, Medical expenses, Savings, Singles
JEL(s):
Programme Areas: Public Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16155

While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives.