How Accurate are Expected Retirement Savings?

39 Pages Posted: 19 Feb 2008

See all articles by Steven J. Haider

Steven J. Haider

Michigan State University - Department of Economics; IZA Institute of Labor Economics

Melvin Stephens

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: September 2006

Abstract

This paper examines the ability of workers nearing retirement to report their expected retirement savings, where retirement savings refers to funds held in savings, checking, and investment-type accounts. Responding to such a question is likely to be difficult, even for those who are near retirement, because it requires respondents to assess when they will retire, their likely income stream between the survey date and retirement, and what portfolio choices will be made at retirement. Based on two nationally representative surveys collected two decades apart, we find that most individuals provide some response to the question, particularly when they are allowed to provide a range. Moreover, the responses that are given have substantial predictive power for actual retirement savings, even when compared to the savings in the initial wave. Despite this predictive power, there is evidence that responses do not satisfy the more stringent requirements of the rational expectations hypothesis.

Suggested Citation

Haider, Steven J. and Stephens, Melvin, How Accurate are Expected Retirement Savings? (September 2006). Michigan Retirement Research Center Research Paper No. WP 2006-128, Available at SSRN: https://ssrn.com/abstract=1095000 or http://dx.doi.org/10.2139/ssrn.1095000

Steven J. Haider (Contact Author)

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Melvin Stephens

University of Michigan at Ann Arbor - Department of Economics ( email )

Ann Arbor, MI
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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