Incidental Bequests and the Choice to Self-Insure Late-Life Risks

Lee Lockwood

American Economic Review, 2018, vol. 108, issue 9, 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.

JEL-codes: D14 D15 D64 G22 H55 J26 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20141651
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Citations: View citations in EconPapers (111)

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Working Paper: Incidental Bequests and the Choice to Self-Insure Late-Life Risks (2014)
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