Cohort and target age effects on subjective survival probabilities: Implications for models of the retirement phase

  • Ralph Stevens Ralph Stevens
  • Shang Wu Shang Wu
  • Susan Thorp Susan Thorp

Subjective survival scaling factors are often estimated from one observation of life expectancy and treated as constant to any target age. Using new survey data on subjective survival probabilities, we estimate a model incorporating cohort- and target age-varying beliefs in scaling factors. Both cohort age and target age matter: respondents are pessimistic about overall life expectancy but optimistic about survival at advanced ages, and older respondents are more optimistic than younger. We propose a new theoretical model incorporating cohort- and target age-varying beliefs and illustrate their effects on the perceived value of annuities and on retirement phase consumption plans.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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