Rory McGee - Website
Primary: Applied Microeconomics
Secondary: Public Finance, Household Finance, Health
Paper Title - 'Old Age Savings and House Price Shocks'
Abstract - Elderly households maintain high levels of wealth throughout retirement and many leave bequests. Understanding why requires separating precautionary savings, bequest motives, and the desire to remain in one's home. I develop and estimate a structural model of retirement savings decisions with realistic risks, housing, and heterogeneity in bequest preferences. I combine data on wealth composition, exogenous policy changes, and subjective bequest probabilities in order to separately identify the different motives for holding wealth.
The role of housing explains a large fraction of asset holdings in retirement and estimated parameters reveal substantial heterogeneity in bequest preferences. This has important implications for portfolio allocation and the responses to unanticipated wealth shocks. I use the estimated model to understand the benefits of means tested long term care coverage like Medicaid. Households derive substantial value from these policies and, in particular, from features that exempt their liquid assets from means testing.
- Professor Mariacristina De Nardi
- Professor Eric French
- Professor Richard Blundell
- Dr John Bailey Jones