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Determinants and Life-Cycle Effects of Survival Ambiguity

Author

Listed:
  • Claudio Daminato
  • Irina Gemmo

Abstract

Sound retirement planning requires individuals to have precise beliefs about their survival chances. Based on an online survey experiment administered to a representative sample of the US population, we provide first evidence of the patterns of individuals’ uncertainty about their survival probabilities, i.e., survival ambiguity, over the life-cycle. To this end, we devise a novel direct measure of survival ambiguity at the individual level, using the variance of the distribution of subjective survival probabilities. Leveraging experimental variation, we find that providing information about objective survival chances decreases individuals’ degree of survival ambiguity. Further, we show that individuals’ survival ambiguity is strongly negatively associated with individuals’ savings rates. Finally, we provide a realistic life-cycle model of savings and portfolio choice that rationalizes the empirical evidence. Our findings provide an explanation for the observation that many individuals “save too little” for their retirement and support information campaigns about individuals’ objective survival chances in addition to financial education programs to improve retirement security, as survival ambiguity presents a previously unexplored determinant of financial well-being.

Suggested Citation

  • Claudio Daminato & Irina Gemmo, 2025. "Determinants and Life-Cycle Effects of Survival Ambiguity," Cahiers de recherche / Working Papers 21, Institut sur la retraite et l'épargne / Retirement and Savings Institute.
    • Handle: RePEc:rsi:irersi:21
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    References listed on IDEAS

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    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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