Incidental Bequests and the Choice to Self-Insure Late-Life Risks
American Economic Review
vol. 108,
no. 9, September 2018
(pp. 2513-50)
Abstract
Despite facing significant uncertainty about their lifespans and health care costs, most retirees do not buy annuities or long-term care insurance. In this paper, I find that retirees' saving and insurance choices are highly inconsistent with standard life cycle models in which people care only about their own consumption but match well models in which bequests are luxury goods. Bequest motives tend to reduce the value of insurance by reducing the opportunity cost of precautionary saving. The results suggest that bequest motives significantly increase saving and significantly decrease purchases of long-term care insurance and annuities.Citation
Lockwood, Lee M. 2018. "Incidental Bequests and the Choice to Self-Insure Late-Life Risks." American Economic Review, 108 (9): 2513-50. DOI: 10.1257/aer.20141651Additional Materials
JEL Classification
- D14 Household Saving; Personal Finance
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- D64 Altruism; Philanthropy; Intergenerational Transfers
- G22 Insurance; Insurance Companies; Actuarial Studies
- H55 Social Security and Public Pensions
- J26 Retirement; Retirement Policies