Subjective Life Expectancy

Individuals' subjective life-expectancy, as elicited in large-scale surveys, shows underestimation of survival chances at young versus overestimation at old ages. These distorted perceptions of objective survival chances may cause young people to save too little and old people to accumulate too much wealth late in life with respect to the rational expectations benchmark model. Alternative explanations for these differences between perceived and objective survival chances include cognitive shortcomings or/and preference-based (motivational) reasons. To know the exact nature of these differences would be relevant for judging policy interventions that aim at influencing people’s savings behaviour.