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The link between individual expectations and savings: Do nursing home expectations matter?

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Author Info
Kristin J. Kleinjans
Jinkook Lee () (Department of Economics, University of Aarhus, Denmark)

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Abstract

Preparing for the end of life, especially for the prospect of needing long-term care, is an important issue facing older Americans. Those who reach age 65 have a 40% chance of going into a nursing home in their remaining lifetime, and about 10% of those who do will stay there for at least five years. The costs of a stay are high with on average US$70,000 annually for a private room. Long-term stays in nursing homes are, therefore, not likely, but very expensive. In this paper, we examine individual expectations about future nursing home entry and study the relationship between these expectations and savings behavior, using data from the Health and Retirement Study. We find a clear relation between subjective expectations and probability of future nursing home entry, and a positive effect of these expectations on savings behavior. Surprisingly, we find no difference of this effect by wealth group, so it seems that Medicaid eligibility in the context of nursing home entry plays no factor in the decision to save.

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Publisher Info
Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2006-05.

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Length: 38
Date of creation: 24 Apr 2006
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Handle: RePEc:aah:aarhec:2006-05

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Related research
Keywords: expectations; nursing home; savings;

Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Deborah A. Cobb-Clark & Steve Stillman, 2006. "The Retirement Expectations of Middle-Aged Individuals," CEPR Discussion Papers 540, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
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