The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives

Ameriks, John; Caplin, Andrew; Laufer, Steven; Nieuwerburgh, Stijn Van

doi:10.1111/j.1540-6261.2010.01641.x

Cited by 310 publications

(344 citation statements)

References 65 publications

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“…They leave the remaining wealth as an incidental bequest. Suggestive evidence in favor of this explanation is provided in a recent study by Ameriks et al (2011). Third, moving involves not only large monetary costs but also emotional costs of settling into a new environment.…”

Section: Housing and Portfolio Choicementioning

confidence: 74%

“…This functional form is widely used in the recent savings literature; see e.g. De Nardi et al (2010), Ameriks et al (2011), Lockwood (2012.…”

Section: A Life-cycle Model With Bequestsmentioning

confidence: 99%

“…Thus, savings serve a dual role and the importance of both motives cannot be distinguished without additional information. Ameriks et al (2011) designed a survey question to measure the tradeoff between the size of the bequest and the amount spent on long-term care expenses-which is an important driver of precautionary saving in the US. Their result indicates that intended bequests are an important reason to save.…”

Section: A Life-cycle Model With Bequestsmentioning

confidence: 99%

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Saving Behavior and Portfolio Choice After Retirement

2015

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This paper reviews the literature on saving behavior and portfolio choice after retirement and provides a descriptive analysis of this behavior by Dutch elderly households. Studying saving behavior in the Netherlands is informative because of the very different institutional background compared to the US, for which most of the empirical evidence is. In the Netherlands, the generous pension system and almost complete coverage of the public health-and long-term care insurance system makes precautionary saving less necessary. Using detailed administrative data, we present evidence on the extent to which the financial resources of retirees are affected by shocks such as the decease of a spouse or deteriorating health-similar to recent empirical studies by Poterba et al. ( 2014) for the US. Moreover, we examine the extent to which retirees who do not experience any shocks are able to keep positive wealth at their disposal and sustain their consumption level during retirement. Our results show that the death of the spouse results in a significant reduction of household wealth compared to surviving couples-which is also found in the USwhile health shocks result in higher household savings in old-age due to the almost complete coverage of health care expenditures. Although retirees in the Netherlands face limited uncertainty about health expenditures, our analysis shows that the elderly, on average, keep large amounts of assets even at a very old age. Our findings suggest that (1) the generous pension benefits are protective of household wealth, (2) illiquid housing wealth constrains the decumulation of household wealth, (3) bequests and transfers after the death of the first spouse are important.

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Section: Housing and Portfolio Choicementioning

confidence: 74%

“…This functional form is widely used in the recent savings literature; see e.g. De Nardi et al (2010), Ameriks et al (2011), Lockwood (2012.…”

Section: A Life-cycle Model With Bequestsmentioning

confidence: 99%

Section: A Life-cycle Model With Bequestsmentioning

confidence: 99%

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Saving Behavior and Portfolio Choice After Retirement

2015

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“…The fact that housing is decumulated at a substantially slower rate than other types of wealth suggests that retirees treat housing differently from other assets. 1 Since housing constitutes a significant portion of retirement wealth, this can also affect the retirees' willingness to annuitize.…”

Section: Introductionmentioning

confidence: 99%

Accounting for non-annuitization

Pashchenko

2013

Journal of Public Economics

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Why don't people buy annuities? Several explanations have been provided by the previous literature: large fraction of preannuitized wealth in retirees' portfolios; adverse selection; bequest motives; and medical expense uncertainty. This paper uses a quantitative model to assess the importance of these impediments to annuitization and also studies three newer explanations: government safety net in terms of means-tested transfers; illiquidity of housing wealth; and restrictions on minimum amount of investment in annuities. This paper shows that quantitatively four explanations play a big role in reducing annuity demand: preannuitized wealth, minimum annuity purchase requirement, illiquidity of housing wealth, and bequest motives. The annuity purchase involves big upfront investment, especially if there is a minimum purchase restriction. This is binding for many, especially if housing is illiquid and part of wealth is preannuitized. While bequest motives significantly reduce the overall annuity demand, the model with a strong bequest motive cannot match the empirical fact that high-income people have the highest demand for annuities.

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“…Friedman and Warshawsky (1990) study a model of saving and annuity demand and find that a bequest motive in combination with actuarial unfairly priced annuities can reduce annuity demand. Ameriks et al (2011) also conclude that the bequest motive is an important factor to determine the individual annuity demand. In contrast, Hurd (1989) finds that the utility of a bequest is small and therefore desired bequests are small on average.…”

Section: Rational Aspects A) Bequest Motivementioning

confidence: 99%

Time inconsistent preferences and the annuitization decision

Schreiber

Weber

2016

Journal of Economic Behavior & Organization

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Good news can involve difficult decisions. For example winning a lottery jackpot can go along with the decision, whether to have the jackpot paid out immediately as a lump sum or as periodic annual payments. Also when entering retirement most people face the decision whether they want their defined contribution account balance paid as a lump sum or to annuitize that amount. The fact that people tend to choose the lump sum even if economic reasons suggest that they should choose the annuity is called the annuity paradox. In a large online survey we find that people behave time inconsistent: older people have a stronger tendency to choose the lump sum than younger people when they are asked to predict today what to choose when they retire. This effect is considerably stronger for participants that answer simple time preference questions inconsistently. Our findings suggest to think about precommitment devices for the annuitization decision.

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The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives

Cited by 310 publications

References 65 publications

Saving Behavior and Portfolio Choice After Retirement

Saving Behavior and Portfolio Choice After Retirement

Accounting for non-annuitization

Time inconsistent preferences and the annuitization decision

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