
Contents
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1.1 The Data 1.1 The Data
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1.2 Lifetime Earnings and the Wealth of Households 1.2 Lifetime Earnings and the Wealth of Households
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1.3 The Distribution of Wealth for Given Lifetime Earnings 1.3 The Distribution of Wealth for Given Lifetime Earnings
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1.3.1 Dispersion in Asset Accumulation Given the Same Lifetime Earnings 1.3.1 Dispersion in Asset Accumulation Given the Same Lifetime Earnings
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1.3.2 Chance Events versus Saving Choice and Investment Choice 1.3.2 Chance Events versus Saving Choice and Investment Choice
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1.4 The Wealth That Consistent Saving Would Have Produced 1.4 The Wealth That Consistent Saving Would Have Produced
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1.5 Self-assessed Saving Adequacy, Attitudes Toward Saving, and Asset Accumulation 1.5 Self-assessed Saving Adequacy, Attitudes Toward Saving, and Asset Accumulation
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1.6 Conclusions and Discussion 1.6 Conclusions and Discussion
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Appendix Appendix
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The Sample The Sample
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Wealth Wealth
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Pension Wealth Pension Wealth
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Imputation of Key Missing Data Imputation of Key Missing Data
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Constructing Pension Wealth Constructing Pension Wealth
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References References
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1 Choice, Chance, and Wealth Dispersion at Retirement
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Published:September 2001
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Abstract
In a previous study, the authors of this chapter evaluated the extent to which the different wealth accumulation of households with similar lifetime earnings could be accounted for by random shocks, such as health status and inheritances, that could reduce or increase the available resources out of which saving could be drawn. They concluded that only a small fraction of the dispersion in wealth accumulation within lifetime earnings deciles could be accounted for by random shocks, and thus that most of the dispersion could be attributed to choice; some people save while young, others do not. This chapter continues that analysis but with two additions: first, it evaluates the effect of investment choice on the accumulation of assets — in particular, how much of the dispersion in wealth can be accounted for by the choice between investment in the stock market and investment in presumably less risky assets such as bonds or bank saving accounts. Second, it attempts to understand the relationship between asset accumulation and individuals' assessment, just prior to retirement, of the adequacy of their saving and their saving behavior. The results indicate that the bulk of the dispersion in wealth at retirement results from the choice of some families to save while other similarly situated families choose to spend. For the most part, controlling for lifetime earnings, persons with little saving on the eve of retirement have simply chosen to save less and spend more over their lifetimes. Families with modest lifetime earnings would have accumulated substantial wealth had they saved consistently and invested prudently over the course of their working lives.
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