The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives

Abstract:     
The ``annuity puzzle", conveying the apparently low interest of retirees in longevity insurance, is central to household finance. One possible explanation for low annuitization is ``public care aversion" (PCA), retiree aversion to simultaneously running out of wealth and being in need of long term care. Another possible explanation is an intentional bequest motive. In order to disentangle the relative importance of PCA and the bequest motive, we estimate a structural model of the retirement phase using a novel survey instrument that includes hypothetical questions. We identify PCA as very significant and bequest motives that spread deep into the middle class. Our results highlight potential interest in annuities that make special allowance for long term care expenses.

Keywords: public care aversion, annuity puzzle,bequest, long-term care, survey methodology, household finance

JEL Classifications: I10, D10, D91, G10

Working Paper Series