Peter’s Blog

I attended an interesting lecture last night put on by the University of Chicago GSB alumni club. Professor Erik Hurst gave an interesting talk about pensions. He argues that the old saw that people aren’t saving enough for retirement is false for the vast majority of people. A common reason people think retirees are impoverished is because their food spending, of all things, goes down. However, statistics show that the food they eat stays constant and the time they spend shopping and preparing food goes up – they’ve replaced expensive prepared food with raw ingredients that they prepare themselves. So know you know why grandparents everywhere seem to spend their entire days at the supermarket!

So who doesn’t have enough money for retirement? It’s approximately 20% of the population (in most OECD countries), and most of them have ‘involuntarily’ retired. Why retire involuntarily? Normally it is because of a ‘health shock’ (great phrase), in which bad health both costs people a lot of money and prevents them from returning to work. So, these people stop working earlier than they hoped to (or need to) and, at the same time, most countries have good insurance for health expenses but little for lost income.

Pretty interesting, huh? There’s also some interesting research Hurst did on the economics of bling.