The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States

TitleThe Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States
Publication TypeReport
Year of Publication2006
AuthorsBloom, DE, Canning, D, Moore, M, Song, Y
InstitutionNational Bureau of Economic Research, NBER Working Paper 12688
Call Numbernewpubs20070125_NBERwp12688
KeywordsExpectations, Net Worth and Assets, Retirement Planning and Satisfaction
Abstract

We explore the proposition that expected longevity affects retirement decisions and accumulated wealth using micro data drawn from the Health and Retirement Study for the United States. We use data on a person's subjective probability of survival to age 75 as a proxy for their prospective lifespan. In order to control for the presence of measurement error and focal points in responses, as well as reverse causality, we instrument subjective survival probabilities using information on current age, or age at death, of the respondent's parents. Our estimates indicate that increased subjective probabilities of survival result in increased household wealth among couples, with no effect on the length of the working life. These findings are consistent with the view that retirement decisions are driven by institutional constraints and incentives and that a longer expected lifespan leads to increased wealth accumulation.

URLhttp://www.nber.org/papers
Endnote Keywords

Subjective Probabilities of Survival/Wealth Accumulation/Retirement Planning

Endnote ID

17110

Citation Key5668