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Long-Term-Care Utility and Late-in-Life Saving

John Ameriks (), Joseph Briggs (), Andrew Caplin (), Matthew Shapiro and Christopher Tonetti ()

No 20973, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Older wealthholders spend down assets much more slowly than predicted by classic life-cycle models. This paper introduces health-dependent utility into a model in which preferences for bequests, expenditures when in need of long-term care (LTC), and ordinary consumption combine with health and longevity uncertainty to explain saving behavior. To sharply identify motives, it develops strategic survey questions (SSQs) that elicit stated preferences. The model is estimated using these SSQs and wealth data from the Vanguard Research Initiative. A robust finding is that the desire to self-insure against long-term-care risk explains a substantial fraction of the wealthholding of older Americans.

JEL-codes: D91 E21 H31 I10 J14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hea, nep-mac, nep-mfd and nep-upt
Date: 2015-02
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Handle: RePEc:nbr:nberwo:20973