Perceptions of Mortality: Individual Assessments of Longevity Risk

Financially successful retirement depends in large part on managing longevity risk: individuals need to
save during their working lives to cover expenses in retirement, and then they must spend down those
savings carefully so as not to outlive their assets. Despite the centrality of individuals’ expectations
regarding life expectancy, little is known about how longevity expectations are formed and how they
evolve as individuals age. This paper assesses the evolution of subjective survival probabilities, defined
as the probabilities that people believe they will live to at least 75 or 85 years of age. I examine the
correlates of these reported probabilities when initially measured, how they change over time, and in
particular, how they change with major life course events like the death of a parent, in-law, spouse, or
sibling. I also examine how the subjective probabilities change in response to health shocks such as a
heart attack or diagnosis of diabetes.