The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives
The Vanguard Group, Inc.
New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)
Federal Reserve Board
Stijn Van Nieuwerburgh
New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
June 7, 2010
Journal of Finance, Forthcoming
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. To disentangle the relative importance of PCA and 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.
Number of Pages in PDF File: 50
Keywords: public care aversion, annuity puzzle, bequest, long-term care, survey methodology, household finance
JEL Classification: I10, D10, D91, G10
Date posted: April 27, 2007 ; Last revised: June 8, 2010