TESTING METHODS TO ENHANCE LONGEVITY AWARENESS
By Olivia S. Mitchell, Abigail Hurwitz and Orly Sade
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 people’s 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 evidence suggesting that many people are simply unaware of longevity risk.
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About the Authors
Olivia S. Mitchell is with The Wharton School, University of Pennsylvania and the National Bureau of Economic Research.
Abigail Hurwitz is with the Hebrew University of Jerusalem, Israel.
Orly Sade is with the Hebrew University of Jerusalem, Israel.