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

Lee Lockwood

No 20745, NBER Working Papers from National Bureau of Economic Research, Inc

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: D91 E21 H55 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias and nep-mac
Note: AG PE
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Citations: View citations in EconPapers (62)

Published as Lee M. Lockwood, 2018. "Incidental Bequests and the Choice to Self-Insure Late-Life Risks," American Economic Review, vol 108(9), pages 2513-2550.

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Journal Article: Incidental Bequests and the Choice to Self-Insure Late-Life Risks (2018)
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