EconPapers    
Economics at your fingertips  
 

Who can predict their own demise? Heterogeneity in the accuracy and value of longevity expectations☆

Teresa Bago d'Uva, Owen O'Donnell and Eddy Van Doorslaer

The Journal of the Economics of Ageing, 2020, vol. 17, issue C

Abstract: Inaccurate longevity expectations can result in suboptimal lifecycle planning with negative consequences for wellbeing in old age. We evaluate the accuracy of expectations by comparing the subjective probability of living to 75 reported in the Health and Retirement Study with survival to that age. Outcomes are positively correlated with the subjective predictions. But the prediction errors are large. Even larger than if every respondent had reported a 50–50 chance of survival. The subjective predictions are less accurate than life table probabilities based on age and sex only. On average, the respondents underestimate their chances of survival by almost 9 percentage points, with women displaying greater downward bias. Predictions are least accurate, most poorly calibrated and most noisy among the least educated and least cognitively able. By and large, using the subjective predictions to take decisions would generate less value than if everyone were to decide on the basis of the mean survival rate, or even the life table probability. Despite the predictions of the least educated being the least accurate, they are not unambiguously the least valuable, although they are most prone to generating large losses from excessive pessimism and optimism.

Keywords: Longevity; Expectations; Subjective probability; Education; Cognition (search for similar items in EconPapers)
JEL-codes: D83 D84 I12 J14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2212828X16300512

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joecag:v:17:y:2020:i:c:s2212828x16300512

DOI: 10.1016/j.jeoa.2017.10.003

Access Statistics for this article

The Journal of the Economics of Ageing is currently edited by D.E. Bloom, A. Sousa-Poza and U. Sunde

More articles in The Journal of the Economics of Ageing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-19
Handle: RePEc:eee:joecag:v:17:y:2020:i:c:s2212828x16300512