Practical Applications of Minding the Gap in Subjective Mortality Estimates

Abstract

In Minding the Gap in Subjective Mortality Estimates, from the Fall 2021 issue of The Journal of Retirement, David Blanchett (PGIM DC Solutions) discusses the accuracy of life expectancy estimates, a key factor in retirement planning. The study looks at subjective mortality estimates (how long someone thinks he or she will live) and objective estimates, which consider well-established drivers of life expectancy. The author notes that, in the aggregate, people have a pretty good sense about their survival forecast, especially when they consider health as a factor. However, in these personal assumptions, there is a tendency to overlook a number of important objective factors, such as smoking and income levels. Blanchett’s study adds to existing research in three ways. First, it reviews actual survival rates of respondents from a 1992 Health and Retirement Study (HRS). Second, it examines how subjective estimates should be considered in the presence of objective information. Finally, the study looks at more recent subjective estimates and finds that subjective mortality estimates have not become more accurate over the years.