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

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  • David E. Bloom
  • David Canning
  • Michael Moore
  • Younghwan Song

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.

Suggested Citation

  • David E. Bloom & David Canning & Michael Moore & Younghwan Song, 2006. "The Effect of Subjective Survival Probabilities on Retirement and Wealth in the United States," NBER Working Papers 12688, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12688
    Note: AG EH LS PE
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    References listed on IDEAS

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    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • I1 - Health, Education, and Welfare - - Health
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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