Mortality Salience Lowers Preferred Retirement Asset Decumulation Rates
Standard life-cycle economic theory suggests that people should spend down assets during retirement at a rate maximizing their lifetime consumption. However, actual retiree behavior exhibits asset decumulation at much slower rates, not at all, or even continued accumulation. One potential factor is that decumulation requires personal mortality estimations. Previous research finds that personal mortality reminders (1) are aversive and (2) increase focus on impacting those who will survive. Correspondingly, recent research has found that (1) annuity purchases are reduced due to associated personal mortality reminders and (2) mortality reminders increase relative preference for annuities that pay less income but provide a greater bequest provision. This study investigates whether mortality salience will also influence the broader issue of an individual's asset decumulation decisions in retirement. Using a randomly assigned experimental test, we find that increasing mortality salience increases the desire to retain assets in retirement, reducing the preferred spending rates in retirement. Understanding the role of mortality salience on decisions about asset decumulation in retirement can be beneficial to academic researchers and financial planners.
Lui, Yi and James, Russell (2021). "Mortality Salience Lowers Preferred Retirement Asset Decumulation Rates." Journal of Personal Finance (IARFC) 20.1, 67-78.
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