Household Income, Asset Allocation, and the Retirement Decision

Abstract

We examine the linancial condition of households as they move into retirement and the relative influence of wealth and income on the decision to retire. We find no significant difference between the net worth of retired and nonrctired households, suggesting that retirees are no more adequately prepared for retirement than the nonretired subsamplc. With respect to portfolio allocation, retired households have significantly more financial assets, with a concentration in fixed-income securities, but home equity accounts for nearly half of their net worth. In addition, other household members’ employment earnings generate approximately 40% of income for retired households.