Incidental Bequests and the Choice to Self-Insure Late-Life Risks.

  title={Incidental Bequests and the Choice to Self-Insure Late-Life Risks.},
  author={Lee M. Lockwood},
  journal={The American economic review},
  volume={108 9},
Despite facing significant uncertainty about their lifespans and health care costs, most retirees do not buy annuities or long-term care insurance. In this paper, I find that retirees’ saving and insurance choices are highly inconsistent with standard life-cycle models in which people care only about their own consumption but match well models in which bequests are luxury goods. Bequest motives tend to reduce the value of insurance by reducing the opportunity cost of precautionary saving. The… CONTINUE READING