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

WDA-HSG Discussion Paper No. 2007-1

WBS Finance Group Research Paper No. 166

45 Pages Posted: 12 Jul 2011

See all articles by David E. Bloom

David E. Bloom

Harvard University - T.H. Chan School of Public Health; National Bureau of Economic Research (NBER)

David Canning

Harvard University - T.H. Chan School of Public Health

Michael Moore

University of Warwick - Warwick Business School

Younghwan Song

Union College - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2006

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.

Keywords: longevity, retirement decisions, wealth accumulation

JEL Classification: J26, J48

Suggested Citation

Bloom, David E. and Canning, David and Moore, Michael John and Song, Younghwan, The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States (November 1, 2006). WDA-HSG Discussion Paper No. 2007-1, WBS Finance Group Research Paper No. 166, Available at SSRN: https://ssrn.com/abstract=1884068 or http://dx.doi.org/10.2139/ssrn.1884068

David E. Bloom (Contact Author)

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
United States
617-432-0654 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Canning

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
United States

Michael John Moore

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Younghwan Song

Union College - Department of Economics ( email )

Schenectady, NY 12308-3107
United States

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