Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108I NCOME & WEALT H 60 even among people with the same total income over their lifetimes (Venti and Wise 1998). In an effort to find out why, investigators have used the HRS data to examine thinking and behavior when it comes to personal savings. For example, a study using HRS data from 2000 found that a notable proportion of participants with 401(k) plans hold large amounts of their employers’ stock in these plans, thus increasing the volatility and risk of their retirement wealth relative to portfolios that are more diversified in terms of common stocks and other assets (Poterba 2004). HRS data analysts have found that many older Americans do not save enough—or save noth- ing—for retirement. Data from a 1996 HRS experi- mental module indicate that the median amount saved by people over the prior 10 years was about $10,000—roughly 3 percent of their median 10-year income. Upon reaching retirement, about 40 percent of participants had the same amount (or less) of savings as they had 10 years earlier. More than one-third of participants had saved nothing for retirement. Nearly three-fourths of people surveyed felt that they had not saved enough, and the vast majority of that group said they would save more if they had it to do over again. Although most working participants said that their prior saving rates had been too low, only one-third planned to start saving at a higher rate. The most common reason for not increasing savings was “low income.” A subset of participants was asked what they would do with the unexpected money if they were given a hypothetical windfall. About 70 percent said they would save it. There is little evidence, however, that people will actually change their behavior given their anticipated incomes, the study concludes (Hurd 1996). A more recent analysis of HRS data from 1992 through 2002 estimated retirement-saving short- falls and explored whether or not such shortfalls correlated with the likelihood of continued work at ages 62 and 65 (Au et al. 2005). The researchers looked at three categories of likely retirement as- sets: financial wealth, which includes business assets, stocks, bonds, individual retirement accounts (IRAs), and bank accounts; net home equity; and retirement wealth, based on the actuarial present value of future benefits from Social Security and/or private pensions. This asset information was used to derive households’ projected shortfalls for retirement at ages 62 and 65, assuming typical household consumption. The study found that the median married-couple household with an average age of 56 would need to save 17 percent more of its present earnings to be able to afford to retire at age 62 without a significant change in lifestyle. By delaying retire- ment until age 65, the shortfall was reduced by 40 percent, to around 10 percent of present earnings. The shortfalls were larger for house- holds with unmarried people, but a proportionally greater gain could be achieved by delaying retire- ment until age 65. Controlling for a number of possible confounding factors, the researchers found that people, especially unmarried people, in households that have the greatest saving needs do in fact work longer, suggesting that people in this group recognize likely shortfalls and extend their working lives. Research using early HRS data has also found that health makes a difference in how much people save for retirement. Lum and Lightfoot (2003) found that good health was strongly correlated with the probability that someone nearing retirement age would contribute to an IRA, as well as with the total amount of money invested in IRAs. For married people, spouses’ health correlated with participants’ access to employer-sponsored FIG. 3-3 Mean income for married-person households, by self-reported health status: 2002 Married Male Respondent Married Female Respondent Poor Fair Good Very Good Excellent $0 $20,000 $40,000 $60,000 $80,000 $100,000