Uncertain health and survival, effects on the savings of retired couples

by Lee A. Lillard, Yorem Weiss


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The analysis of this paper focuses on the impact of health and survival uncertainty on the saving and consumption decisions of retirees. The decision unit which the authors investigate is a husband-wife household which pools the resources of its surviving members. If one spouse dies, his partner gets the remaining assets; and if both die, the remaining assets are left as bequests. The health and survival status of both partners affects the asset accumulation path. The authors use a dynamic programming approach to model the household's planning problem. The data used for the estimation is the Longitudinal Retirement History Survey which followed individuals aged 58-63 in 1969 for a period of ten years. Compared with the existing literature, this paper is distinguished in its emphasis on health and in its explicit treatment of the household.

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