Racial and Ethnic Differences in Longevity Perceptions and Implications for Financial Decision Making

Abstract

Inaccurate perceptions regarding life expectancy can lead to suboptimal financial decisions with long-term consequences, including undersaving prior to retirement and overspending during retirement. As prior research suggests that Covid-19 disproportionately harmed those with low-income, Blacks, and Hispanics in the United States, we seek to determine whether subjective survival perceptions among these groups changed in a manner consistent with observed outcomes. We fielded two online experimental surveys of US residents, one of which occurred at the outset of the pandemic, and the second, a year later. Using vignettes, we examine whether minorities’ perceptions regarding longevity at the outbreak were consistent with observed reality, and how these compared to members of the White majority population. Furthermore, the panel aspect of our study enables us to test whether and how these perceptions updated over time during the pandemic. Finally, we show how these perceptions related to advice regarding retirement saving and drawdowns.

Keywords: life expectancy; longevity risk; financial behaviors; minorities

JEL Classification: D1, D91, G41, G51