How will more retirees affect investment returns?

Abstract

The brief's key findings are: (1) Economic theory suggests that retirees draw down their assets, so a higher retiree-worker ratio reduces the supply of saving, thereby increasing investment returns. (2) However, research generally shows that retirees draw down their wealth much more slowly than expected, particularly the wealthy who hold most of the assets. (3) Therefore, retirees still hold substantial assets, leading to a greater supply of savings and a decrease in investment returns. (4) To the extent that investment returns decrease, workers will need to save more to maintain their standard of living in retirement.