Testing Methods to Enhance Longevity Awareness

Abstract

Many people do not understand the concepts of life expectancy and longevity risk, potentially leading them to under-save for retirement or to not purchase longevity insurance, which in turn could reduce wellbeing at older ages. We investigate alternative ways to increase the salience of both concepts, allowing us to assess whether these change peoples’ perceptions and financial decision making. Using randomly-assigned vignettes providing subjects with information about either life expectancy or longevity, we show that merely prompting people to think about financial decisions changes their perceptions regarding subjective survival probabilities. Moreover, this information also boosts respondents’ interest in saving and demand for longevity insurance. In particular, longevity information influences both subjective survival probabilities and financial decisions, while life expectancy information influences only annuity choices. We provide some evidence that many people are simply unaware of longevity risk.

Keywords: retirement expectations; annuity; longevity; life expectancy

JEL Classification: G52, J32, D91