A Model Of Desired Wealth At Retirement

Abstract

This paper illustrates and executes a strategy for estimating the amount of wealth at which a person will retire. The concept of permanent income is used to frame the retirement decision as one where you retire when your full wealth can afford you your desired consumption. Recently retired individuals from the 1983, 1986 and 1989 Survey of Consumer Finances are used to predict what observable characteristics in a household determine this threshold, or reservation wealth level. These estimations include several simulations.