NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Long-Term-Care Utility and Late-in-Life Saving

John Ameriks, Joseph S. Briggs, Andrew Caplin, Matthew D. Shapiro, Christopher Tonetti

NBER Working Paper No. 20973
Issued in February 2015
NBER Program(s):   AG   EFG   HE   ME   PR

Older wealthholders spend down assets much more slowly than predicted by classic life-cycle models. This paper introduces health-dependent utility into a model in which preferences for bequests, expenditures when in need of long-term care (LTC), and ordinary consumption combine with health and longevity uncertainty to explain saving behavior. To sharply identify motives, it develops strategic survey questions (SSQs) that elicit stated preferences. The model is estimated using these SSQs and wealth data from the Vanguard Research Initiative. A robust finding is that the desire to self-insure against long-term-care risk explains a substantial fraction of the wealthholding of older Americans.

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This paper was revised on May 25, 2017

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Document Object Identifier (DOI): 10.3386/w20973

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