Cognitive Ability and Post-Retirement Asset Decumulation

Research output: Contribution to journalArticle

Abstract

Post-retirement asset decumulation decisions are complex and may be affected by cognitive abilities. Estimating uncertainties such as life expectancy and medical costs and incorporating them effectively into decumulation decisions may be especially difficult as retirees face age-related changes in cognition. This may result in rates of decumulation that are contradictory to the goals that motivated accumulation, leading to potentially large utility losses. We investigate whether cognitive ability is relevant to asset decumulation decisions within our sample. We find that cognitive ability is a significant predictor of the rate of asset decumulation, and that those with lower levels or cognitive ability are decumulating at a significantly lower rate. We also show that the level of cognitive ability influences the effects of expected longevity, market returns, and medical costs. While the estimates for these factors are consistent between those with high and low cognitive ability, there
Original languageEnglish
Pages (from-to)1-12
JournalJournal of Family and Economic Issues/Springer
DOIs
StatePublished - Jul 9 2015

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