Do People Successfully Manage Their Nest Eggs Through Retirement? Evidence from the Evolution of US Household Balance Sheets

This paper investigates how resources accumulated in working years are managed over retirement using public Health and Retirement Study (HRS) data representing 15.2 million seniors in the United States. We build wealth estimates from specific balance sheet components: Social Security, DB and DC pension, IRA, annuity, net home equity, and other assets. We construct more comprehensive estimates of DC wealth than are readily available to researchers for select years using detailed data on current balances from prior employment. We find: (1) Social Security plays a fundamentally important and complementary role in the US retirement system; (2) an important consideration for estimates of wealth derived from income streams (including Social Security) is that these mechanically decline as mortality draws nearer, biasing changes in absolute measures of wealth downward. Nevertheless, we find (3) people largely hold sufficient wealth to maintain their relative standards of living. However, (4) a range of experiences do exist in retirement, including hardship. Investigating deciles of the wealth distribution, which help to control for declines in income-based wealth measures over time, we find that (5) those experiencing hardship do not tend to fall from high- or middle-wealth deciles to lower ones as they age, but instead tend to be enduring longstanding hardship