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 Publication2007
AuthorsBloom, DE, Canning, D, Moore, M, Song, Y
InstitutionUniversity of St. Gallen, World Demographic Association
Call Numbernewpubs20070403_WDA-HSG2007-1.pdf
KeywordsExpectations, Net Worth and Assets
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.wdassociation.org/_ulfs/documents/WDA-HSG-DP2007-1_Bloom_etal.pdf
Endnote Keywords

Subjective Probabilities of Survival/Wealth Accumulation

Endnote ID

17330

Citation Key5682