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