Life-Cycle Models of Saving and the Effect of the Timing of Divorce on Retirement Economic Weil-Being

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Abstract
The long-term effect of the current high rate of divorce upon the future economic status of individuals has not been thoroughly analyzed. This study reviews the retirement, precautionary, and bequest motives for saving, then evaluates how marriage dissolution may (a) decrease the family's savings rate, (b) cause shifts in the family's portfolio to assets with lower rates of return, and (c) destroy or deplete existing family assets. Whether divorce interrupts the savings process or destroys assets, it is unlikely that most individuals will be able to save enough in later life to overcome the loss. The long-term effect may well be that, in future years, we will recognize a new category of elderly poor, those who have experienced the dissolution of their marriage.

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