TY - JOUR T1 - How do the risks of living long and facing high medical expenses affect the elderly's saving behavior? JF - Chicago Fed Letter Y1 - 2012 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones KW - Adult children KW - Consumption and Savings KW - Health Conditions and Status KW - Net Worth and Assets KW - Retirement Planning and Satisfaction AB - Although the elderly have a lot of wealth, people still do not fully understand their patterns of saving behavior. Many elderly individuals keep large amounts of wealth even as they near the ends of their lives. Furthermore, as one study shows, income-rich households are especially frugal. Among the motivations for saving are the risks of living long and having high medical expenses in old age. In recent research, the authors quantify the importance of forces by estimating and simulating a rich model of saving behavior. Life spans vary greatly in both predictable and unpredictable ways. Using mortality rates estimated from the AHEAD, they find that rich people, women, and healthy people live much longer than their poor, male, and sick counterparts. The risk of living far past one's expected life span is large and, under incomplete annuitization, a potentially important reason why so many elderly people run down their assets so slowly. PB - 294 VL - 294 UR - https://www.chicagofed.org/publications/chicago-fed-letter/2012/january-294 U4 - transfers/saving behavior/wealth/retirement planning/mortality ER -