Leiter des Survey of Health, Ageing and Retirement in Europe (SHARE) und Direktor des SHARE-ERIC.

Because of the important role that survival expectations play in individual decision making, we investigate the extent to which individual responses to survival probability questions are informative about actual mortality. In contrast to earlier studies, which relied on the Health and Retirement Study (HRS) of US individuals aged 50 and over, we combine household survey data on subjective survival probabilities with administrative data on actual mortality for Dutch respondents aged 25 and over. Our main finding is that in our sample, individual life expectancies (measured as subjective survival probabilities) do predict actual mortality even when we control for a large set of health indicators. Our results further suggest that, on average, women underestimate their remaining life duration, whereas men tend to predict their survival chances more realistically. Both sexes, however, tend to overestimate the age gradient in mortality risk and underestimate the health risks of smoking.

Leiter des Survey of Health, Ageing and Retirement in Europe (SHARE) und Direktor des SHARE-ERIC.

Previous empirical studies have found that individuals do not draw down their assets after retirement which is at odds with the predictions of a simple life cycle model without uncertainty. Hurd (Econometrica 57(4): 1989; Mortality risk and consumption by couples, 1999) explains such saving behavior of retired singles and couples by adding lifetime uncertainty to the simple life cycle model. We tested whether predictions about consumption during retirement of this extended life cycle model hold for a sample of older Americans. We used data from the Health and Retirement Study supplemented with data from the Consumption and Activities Mail Survey. In line with theory we found that, on average, total consumption is greater than their annuity income after retirement and that this difference increases with the level of initial wealth. For older singles but not for couples our results suggest that, as predicted by the extended theoretical model of Hurd, the on average negative consumption growth decreases with higher mortality rates.