Evidence on individual preferences for longevity risk

The standard model of intertemporal choice assumes risk neutrality towards the length of life: under additivity of lifetime utility and expected utility assumptions, agents are not sensitive to a mean preserving spread in the length of life. Using a survey fielded in the RAND American Life Panel, this paper provides empirical evidence on possible deviation from risk neutrality with respect to longevity in the US population. The questions we ask allow to find the distribution as well as to quantify the degree of risk aversion with respect to the length of life in the population. We find evidence that roughly 75% of respondents were not neutral with respect to longevity risk. Hence, there is a little empirical support for the joint use of the expected utility and additive lifetime utility assumptions in life-cycle models. Higher income households are more likely to be risk averse towards the length of life. We do not find evidence that the degree of risk aversion varies with age or education.

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.

MORE ABOUT NETSPAR


Mission en strategy           •           Network           •           Organisation           •          Magazine
Board Brief            •            Actionplan 2023-2027           •           Researchagenda

ABOUT NETSPAR

Our partners

vu
NN_logo_gray
B20190901_nidi-logo_greyscale
B20160708_apg
B20160708_ministeries
View all partners