Right before the End: Asset Decumulation at the End of Life
What happens to people’s assets in the period immediately preceding their death? This is an important question for a number of reasons. To begin with, the elderly have a lot of wealth—households whose heads are 65 or older account for more than one-third of U.S. household wealth—and the way in which they manage all this wealth may depend critically on end-of-life events. If, for example, elderly people are afraid of incurring large medical expenses just before they die, they might keep large amounts of assets even in very old age and not run down their assets until their illnesses appear terminal. Moreover, the need to pay for end-of-life expenses should affect the amount of wealth that younger households accumulate to fund their retirement. The issue of whether working households are saving enough has raised enough debate to warrant its own chapter in the current Economic Report of the President. This debate cannot be resolved until we learn the magnitude of end-of-life expenses.