Longevity risk, subjective survival expectations, and individual saving behavior

TitleLongevity risk, subjective survival expectations, and individual saving behavior
Publication TypeJournal Article
Year of Publication2013
AuthorsPost, T, Hanewald, K
JournalJournal of Economic Behavior & Organization
Volume86
Pagination200-220
ISBN Number0167-2681
KeywordsForecast dispersion, longevity risk, Saving behavior, subjective survival expectations
Abstract

We provide evidence of individuals’ awareness of longevity risk (the uncertainty about future survival probabilities) based on subjective survival expectations elicited in the Survey of Health, Ageing and Retirement in Europe (SHARE) and matching data on longevity risk from the Human Mortality Database. We find a positive relationship between the forecast dispersion in subjective survival estimates and longevity risk which indicates that individuals are to some extent aware of longevity risk. Our analysis of savings behavior shows that the dispersion in survival estimates is primarily explained by individuals disagreeing on the survival probability and not by their true awareness of the underlying uncertainty. Individuals do not save more on average when faced with longevity risk although theory suggests they should.

DOI10.1016/j.jebo.2012.11.012
Citation Key11447