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Healthier and more educated Americans typically accumulate greater amounts of assets than their less-educated peers prior to retirement but asset growth following retirement is also strongly related to educational attainment. That is the finding in a new research paper, "Health, Education, and the Post-Retirement Evolution of Household Assets," co-authored by Harvard Kennedy School Professor David Wise and published by the National Bureau of Economic Research.
Drawing upon data from the Health and Retirement Study (HRS), the authors examined different sets of "health and financial pathways" through which education could impact asset growth over the course of many years. The analysis tracks the assets of persons aged 65 and older between the years 2000-08.
"Older persons with different levels of education may make different consumption and investment decisions in retirement and thus accumulate or draw down assets at different rates," the authors write. "However, asset growth in retirement also depends on choices made long before retirement. Such choices —which were strongly influenced by education—affect the financial and health capital that persons have upon entering retirement and will affect the future evolution of assets."
The authors “aim is to disentangle the effects of education on post-retirement asset evolution that operate through health and financial capital accumulated prior to retirement from the effects of education that impinge directly on asset evolution after retirement.”
The authors make several conclusions:
The authors also conclude that "more educated households not only have more wealth on average in retirement but those with more education also allocate their wealth in a different way than their less-educated counterparts [resulting in] a pronounced education gradient in the return to assets, with more educated households earning more, as a percentage of their asset holdings, than less educated households."
David Wise is John F. Stambaugh Professor of Political Economy at Harvard Kennedy School. His past research includes analysis of youth employment, the economics of education and schooling decisions, and methodological econometric work. His work now focuses on issues related to population aging, and he coordinates large programs on the economics of aging and health care at the National Bureau of Economic Research.
David Wise, John F. Stambaugh Professor of Political Economy
"Older persons with different levels of education may make different consumption and investment decisions in retirement and thus accumulate or draw down assets at different rates," the authors write.