Much of the disagreement over whether the United States faces a retirement savings crisis hinges on different assumptions on how household consumption changes once the kids leave home. The answer seems elusive, but I think we’ve moved the ball.
Much of the disagreement over whether the United States faces a retirement savings crisis hinges on different assumptions on how household consumption changes once the kids leave home.
Andrew Biggs and I teamed up with our colleague Angie Chen to get at the bottom of this issue. You should know that we each have skin in this game. I think that people are woefully unprepared for retirement; Andrew not so much. If we find a meaningful increase in saving when kids leave, he may be right; no increase in saving, then I win.Researchers have tried to determine empirically which of these two theories better describes actual household behavior.
Here’s what we found using data from the Health and Retirement Study and the Panel Study of Income Dynamics.
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