This project will examine the economic status of households close to retirement. Data on wealth and saving will be analyzed using the Health and Retirement Survey (HRS). The first part of the project documents the major facts in the data, in particular the heterogeneity of wealth holdings among similar age or demographic groups, and the extremely low accumulation of some households. Using the panel aspect of the HRS, saving is derived from first-differencing wealth. The distribution and the properties of the saving data are analyzed together with an examination of the stability of wealth over time. Results are compared with two other data sets, the Survey of Consumer Finances and the Panel Study of Income Dynamics, and with the results of other studies. The second part investigates the predictions of a precautionary saving model and examines whether this model is able to explain the empirical facts of the data. Several tests will be implemented to investigate whether households facing high risk save and accumulate more than households facing low risk. The information available in the HRS on three critical variables -- wealth, earnings and health risk, and work history -- makes it possible to perform rigorous tests of the proposition of the theory and allows the research to discriminate among different theories of household behavior.
