PREPARING FOR RETIREMENT: THE EFFECT OF SOCIAL SECURITY ON HOUSEHOLD WEALTH

As the segment of elderly in the overall US population has increased, renewed concerns have arisen about the viability of the Social Security system as it is presently organized. These concerns contribute to an already considerable amount of uncertainty faced by households as they plan for retirement. In addition, changes in the social and economic roles of women have occurred, making the most appropriate model for the investigation of Social Security's impact on the accumulation of household wealth one which considers a dual career household in which decisions are made jointly by husband and wife.;The results of these regressions cannot lend any support to the common notion that the Social Security system is responsible for a substantial decrease in private savings. Instead it seems that households that had a higher income from Social Security had also accumulated more wealth and purchased more life insurance.;There also was some indication that among families with lower wealth accumulation, more of the wives had worked, and that life insurance payments received by widows following their husbands' death contributed significantly to their private assets. Overall, it can be said that wealth accumulation is not only undertaken for life-cycle purposes but also for precautionary and bequest purposes.;This study utilizes such a theoretical model in a two-period framework, in which the first period represents the working years and the second period the retirement years of husband and wife. From a data set that was extrapolated from the Social Security Longitudinal History Survey, cross-sections of the retired elderly in the years 1971 and 1975 were examined, with private net household wealth as the dependent variable in the regression equations.