The importance of bequest motives for saving and insurance decisions in old age.

摘要

This dissertation contains two essays that examine the role of bequest motives in some of the most important financial decisions people make during retirement. In the first essay, I study the "annuity puzzle": very few retirees buy life annuities even though standard economic life cycle models indicate that the benefits from doing so are substantial. I find that the bequest motive is a crucial determinant of the gain from annuities. Whereas people without bequest motives typically would be much better off buying available annuities, people with modest bequest motives are likely to gain little from available annuities and in many cases are better off not annuitizing any wealth at available rates. Bequest motives make self-insurance---and the bequests that often accompany it---much more attractive. My simulations show that bequest motives consistent with other facts significantly reduce the number of people who would otherwise buy annuities.;In the second essay, I study two other major financial decisions faced by retirees: whether to buy long-term care insurance and how much wealth to save into old age. Few retirees buy long-term care insurance (less than 10% of retirees in the U.S.), and most retirees hold much of their wealth into old age. I show that these patterns are consistent with a life cycle model with a strong bequest motive and inconsistent with models without bequest motives. As with annuities, people with bequest motives are much more likely than people without bequest motives to prefer self-insuring their risks in old age because they value the large bequests that often accompany this strategy.;Together, these essays indicate that some of the most important financial decisions that people make during retirement are inconsistent with models in which retirees' exclusive goal is to secure the highest, most stable level of consumption for themselves. Instead, retirees' choices indicate that in addition to valuing their own consumption, they also value the prospect of leaving wealth to their heirs. By testing alternative theories against a wide range of facts, this dissertation uncovers strong evidence that bequest motives have important effects on behavior, including among people who may ultimately leave no bequest.