Life and death when considering financial plansIn a new study, researchers were able to influence someone's estimate of their lifespan -- by more than nine years -- simply by asking them if they expected to "live to" versus "die by" a certain age. In addition, the way the question was posed affected people's preferences for life annuities, which provide insurance for people who outlive their savings.

"We wanted to know whether beliefs about how long one might live would differ with simple changes in framing, and if so, how big is the effect," says John Payne, a Duke University business professor. "The answer is yes, it does matter, and the effects are huge."

Why Semantics Matter

Payne and colleagues from Duke, Columbia University and the University of California at Los Angeles surveyed more than 2,000 respondents about their probable longevity. Using a slider scale, one group was asked to estimate the percentage chance that they would live to a certain age; the other group was asked about their chances of dying by a certain age.

Half the participants received scales that read 0% on the left and 100% on the right; the other half saw a scale that read 100% on the left and 0% on the right. All of the participants provided their estimates on whether they would live or die by the time they are 75, 85 and 95 years old.

If the way the question is posed makes no difference, the two group's answers should have matched up -- i.e., a 60% chance of living would be matched by a 40% chance of dying. But that's not what happened.

People considering how long they would live were more optimistic, estimating that they had a 55% chance of being alive at age 85. Those thinking about when they would die were more pessimistic, estimating a 68% chance of dying at 85 -- or just a 32% chance of being alive. Overall, there was also a 10-year gap in median expected age of death (around 85 years for the live-to group and 75 years for the die-by group).

"This 10-year difference in the median expected age of being dead or alive is not only statistically significant, but also highly meaningful to a number of important life decisions, such as how to finance one's consumption during retirement," the researchers write.

Based on judged probabilities, estimated mean life expectations were 9.38 years longer when presented in the live-to frame. "In terms of decisions about how much I need to retire, when I need to claim Social Security benefits and what I want to do in managing my retirement, this is a big number," Payne says.

The Bottom Line

How do longevity expectations influence financial choices? In a separate study, the researchers asked respondents about life annuities – an investment that requires a large, immediate and nonrefundable payment in exchange for a stream of monthly payments, guaranteed for life. Obviously, the sooner you expect to die, the less attractive an annuity investment becomes.

Participants were presented first with an online brochure titled, "How to Invest for Retirement." It described a life annuity and a self-managed retirement account. Then participants completed the same life-expectancy task, with half in the "live to" frame and half in the "die-by" frame.

On average, individuals in the live-to frame judged their probability of being alive at age 85 at 52%, while those in the die- by frame judged their probability of being alive at 85 at 30%. As with the previous studies, there was an approximately 10-year gap in the median expected age of death.

Next, half of these participants evaluated a single life annuity and reported the likelihood of a purchase. On average, 39% of those who judged themselves likely to live longer said they were likely to buy, while only 26% for those who expected to die sooner planned to buy.

"Individuals in the live-to frame, in particular, showed the strongest sensitivity to estimated life expectations in their annuity preferences," the researchers write. That suggests that the way the longevity question is framed -- and the way you think about your life expectancy -- weighs heavily on decisions about future financial outcomes.

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Greed in american business is just too embeded and their are just too many people with money looking for a deal.

This should be a blip on the radar, becauese it should not have happened in the first place, and the economy is stronger than it appears. Don't let the Dow fool you.
Companies are setting on a record fortune of profits, somebody has to expose them and ask why they are not hiring.

August 08 2011 at 1:04 PM Report abuse -1 rate up rate down Reply

Semantics notwithstanding,one should concentrate on*quality* of life no matter how long one lives.There are ways to achieve both longevity and quality,but most people are not disciplined enough to do this.

August 08 2011 at 11:49 AM Report abuse rate up rate down Reply

Wall Street is going to create a major depression. Some person in the government (with a brain) needs to stop this crap

August 08 2011 at 10:39 AM Report abuse +1 rate up rate down Reply

The average life expectancy for males is 75 more or less not 85 0r 90

August 08 2011 at 10:37 AM Report abuse +1 rate up rate down Reply


August 08 2011 at 5:21 AM Report abuse rate up rate down Reply

Do you get anything for guessing it right?

August 08 2011 at 1:46 AM Report abuse rate up rate down Reply

With free cradle to grave Obama Care paid for with Obama money (worthless dollars he confiscates from you), SS, Medicare, Medicaid, free housing, free food stamps, free water, electricity, and natural gas, free bus transportation, free child care, free child allowances, free earned income tax credit I can live forever off of you and not care how long I might live or not. Thanks to Obama and his socialist band of progressives, I don't have to do anything to live high on your hog.. In fact, if I do try to get ahead on my own it is too hard and I will get punished by Reid, Pelosi, Obama and my parole officer. Better to just keep voting for Socialists who will steal from the rich for me for free, kick back, smell the welfare and not look that gift donkey in the mouth. Just knowing they can walk on water for sure means they are the ones my family has been waiting for, oh so long. Don't pinch me.

August 07 2011 at 3:46 PM Report abuse +1 rate up rate down Reply

I guess I would be the anomoly; With parent who died at 58 and 69 respectively, I have no illusions about living (or dying) any later than about 72, and that's optimistic, which, of course, I'm not! I'm hoping I'm gone before this country and the world economy collapses!

August 07 2011 at 1:43 PM Report abuse +1 rate up rate down Reply

Most people are now thinking retirement funding more in terms of a stream of income rather than a lump sum. Unfortunately, less than 15% of US workers are entitled to a pension with a stream of income when they retire. Couple that with the fact that most can't even make it paycheck-to-paycheck, they don't know how they will survive 20 years of retirement without one. If we do in fact live longer, we will need to be working longer so we can have enough to support a stream of income when we retire.

The first place to start is to start tracking your day-to-day expenses so you'll spend less than you earn. This is the first step to paying off debt and saving for the future so you can retire and be LIQUID.

August 07 2011 at 12:08 PM Report abuse rate up rate down Reply

2 ways to fix the social securiety problem. 1) raise the retirement age. 2) lower the life span.

August 07 2011 at 11:40 AM Report abuse rate up rate down Reply