We find that a large fraction of households have little or no wealth when they are last observed in the survey. Some might suggest that these housholds had "perfect foresight": they anticipated how long they would live and exhausted their wealth as they were approaching death. Several results are inconsistent with this view. First, most of those with little wealth at death also had little wealth in 1995. Thus the pattern is not one of wealth draw-down after retirement, but of arrival at retirement age without much wealth. Second, the drawdown of wealth is closely associated with poor health. In order to “time” the wealth profile to hit zero at death, persons would also have to anticipate health shocks. There is some evidence [Hurd and McGarry (2002), Hurd, McFadden and Merrill (2001)] that people are good judges of their own life expectancy, but the size and randomness of many health shocks would suggest that for many the depletion of assets was unanticipated and not planned for. Third, among those persons who had assets in 1995, many apparently exhausted their assets before death—our last measurement of assets is within two years of death, but many of these persons have yet to face large medical expenditures that occur disproportionately in the last six months of life. Finally, we find no significant relationship between the draw-down of assets and a variable that measures an individual's subjective life expectancy relative to population averages for persons of the same age and and gender.
. . . two-thirds of respondents say they would save more if they “could do it again.” And those who said they saved too little had assets at retirement that were a much lower proportion of lifetime earning than those who said their saving was “about right.”
The authors find that those with the lowest wealth are those with the poorest health in retirement.