End-of-Life Liquidity

Neha Bairoliya (), Giovanni Gallipoli () and Kathleen McKiernan
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Neha Bairoliya: University of Southern California

No 2025-010, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: The interaction between late-life uncertainty and end-of-life (EOL) motives generates demand for death-contingent liquidity, shaping saving, insurance, and labor-supply behaviour. Using evidence on wills, life insurance, and bequest intentions, we document the prevalence of EOL motives across household types. A quantitative life-cycle model embeds three motives—precautionary, survivor, and warm-glow—and exploits the asymmetry between liquid wealth and life insurance to identify EOL preferences. We examine how these motives interact with Social Security's illiquid annuity and assess reforms that replace part of annuity benefits with guaranteed death-contingent payouts or expand access to actuarially fair life insurance. Both policies generate portfolio "de-risking," shifting resources toward guaranteed EOL liquidity. Significant welfare gains accrue to single, low-wealth individuals, a group often overlooked in the debate over EOL motives.

Keywords: life insurance; portfolio choice problem; old age security; annuities; Consumption; Labor Supply; Marriage; inequality; wealth (search for similar items in EconPapers)
JEL-codes: D31 E21 G11 G51 G52 H55 J26 (search for similar items in EconPapers)
Date: 2026-01
New Economics Papers: this item is included in nep-dge
Note: M
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Bairol ... d-life-liquidity.pdf First version, November 12, 2025 (application/pdf)

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