Essays on health and retirement in financial planning
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[EMBARGOED UNTIL 12/1/2024] This dissertation focused on investigating topics that are closely connected to health and retirement that households need to consider when making financial plans. The first chapter assessed the association between health and wealth accumulation among both single and couple households. The study found that chronic diseases impede wealth accumulation for both single and couple households but to different degrees. Although chronic diseases significantly reduced household wealth through losses in income and increased medical expenses for both types of households, the effect was greater for single households. Furthermore, among couple households, the wife's chronic diseases showed greater effects on wealth, income, and out-of-pocket medical expenses at the household level. This study contributes to the literature by highlighting the differential effects of severe chronic diseases on single and couple households. It also sheds light on the different economic effects of health shocks of husbands and wives within couples. The findings provided implications to policymakers regarding identifying and targeting limited resources to households that are most at risk for economic consequences of health shocks and those who are most in need of such public assistance. The second chapter examined differences in active participation and deferral rates between automatic enrollment and active participation in defined contribution (DC) plans. Results showed that DC plans with automatic enrollment led to lower active participation rates than voluntary enrollment. Additionally, automatically enrolled employees tended to have lower deferral rates, but this trend was insignificant among active plan participants. This study showed evidence that some employees opted out from contribution even though they were automatically enrolled in DC plans, suggesting that automatic enrollment may not be as effective as previously thought in promoting active participation and contributions to defined contribution plans. The findings provided implications to employers, policymakers, and researchers regarding methods to motivate employees to actively participate in their DC plans and increase their deferral rate. The third chapter investigated the relationship between chronic health conditions and household medical and non-medical expenses (both discretionary and non- discretionary). Analysis of households affected by various chronic diseases showed that the associations between chronic health conditions and household expenditures vary based on the expenditure category and type of disease. The findings indicated that beyond influencing medical expenses, health conditions also play a significant role in non-medical expenditures including both discretionary and non-discretionary expenditures. The findings of this study provided a more comprehensive understanding of the impact of health conditions on household expenditures, which can help policymakers and healthcare providers develop targeted strategies to alleviate the negative impacts of chronic health problems on retired Americans.
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Ph. D.