Longevity Risk, Subjective Survival Expectations, and Individual Saving Behavior

42 Pages Posted: 30 Jul 2010 Last revised: 26 Nov 2012

See all articles by Thomas Post

Thomas Post

Maastricht University - School of Business and Economics - Department of Finance; Netspar

Katja Hanewald

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 22, 2012

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.

Keywords: longevity risk, subjective survival expectations, forecast dispersion, saving behavior

JEL Classification: D14, D84, D91, H31, J11

Suggested Citation

Post, Thomas and Hanewald, Katja, Longevity Risk, Subjective Survival Expectations, and Individual Saving Behavior (November 22, 2012). Available at SSRN: https://ssrn.com/abstract=1651167 or http://dx.doi.org/10.2139/ssrn.1651167

Thomas Post (Contact Author)

Maastricht University - School of Business and Economics - Department of Finance ( email )

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Katja Hanewald

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

School of Risk & Actuarial Studies
UNSW Sydney
Sydney, New South Wales NSW 2052
Australia

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