American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Medical Expenses and Saving in Retirement: The Case of the United States and Sweden
American Economic Journal: Macroeconomics
(pp. 161–202)
Abstract
Many US households have significant wealth late in life, contrary to the predictions of a simple life-cycle model. By comparison, retirees in Sweden decumulate wealth more quickly while facing smaller out-of-pocket medical expense risks late in life. In this paper, we investigate how well the latter can account for the former using a full life-cycle consumption-saving model. We find that medical expense level and risk account for 32–59 percent of the US-Sweden difference in retirees' speed of wealth decumulation depending on age. We also show that financing and coverage of health insurance affect wealth decumulation patterns in retirement.Citation
Nakajima, Makoto, and Irina A. Telyukova. 2025. "Medical Expenses and Saving in Retirement: The Case of the United States and Sweden." American Economic Journal: Macroeconomics 17 (1): 161–202. DOI: 10.1257/mac.20220211Additional Materials
JEL Classification
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- G22 Insurance; Insurance Companies; Actuarial Studies
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- I13 Health Insurance, Public and Private
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J26 Retirement; Retirement Policies