This paper analyzes why elderly individuals save, focusing on the role of medical expenses. The authors construct a model of saving for retired single people, incorporating bequest motives, heterogeneity in medical expenses and life expectancies. Using data from the Assets and Health Dynamics of the Oldest Old (AHEAD) dataset, they estimate the model using the method of simulated moments. The data show that out-of-pocket medical expenses increase with age and permanent income. For many elderly people, the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs like Medicaid help the poorest elderly, but also benefit the rich by insuring them against medical costs. The authors find that medical expenses are a significant factor in explaining the saving behavior of the elderly, including the rich. They also find that bequests are important for the richest retirees, but their estimates of the bequest motive are imprecise. The model accounts for social insurance programs and differential mortality, which are important in explaining the savings of the elderly. The authors conclude that properly accounting for medical expenses and social insurance programs is crucial to understanding the savings behavior of the elderly.This paper analyzes why elderly individuals save, focusing on the role of medical expenses. The authors construct a model of saving for retired single people, incorporating bequest motives, heterogeneity in medical expenses and life expectancies. Using data from the Assets and Health Dynamics of the Oldest Old (AHEAD) dataset, they estimate the model using the method of simulated moments. The data show that out-of-pocket medical expenses increase with age and permanent income. For many elderly people, the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs like Medicaid help the poorest elderly, but also benefit the rich by insuring them against medical costs. The authors find that medical expenses are a significant factor in explaining the saving behavior of the elderly, including the rich. They also find that bequests are important for the richest retirees, but their estimates of the bequest motive are imprecise. The model accounts for social insurance programs and differential mortality, which are important in explaining the savings of the elderly. The authors conclude that properly accounting for medical expenses and social insurance programs is crucial to understanding the savings behavior of the elderly.