Longevity, Health and Housing Risks Management in Retirement

Annuities, long-term care insurance and reverse mortgages remain puzzlingly unpopular to manage post-retirement longevity, health and housing price risks. We analyze the lack of interest using a flexible life-cycle model structurally estimated with a unique stated-preference survey experiment of Canadian households. High risk aversion, preference for early resolution of uncertainty, strong discounting of valuation in disability states, housing substitutability and bequest motives play key roles in explaining most of the limited demand. The remaining disinterest is accounted for by information frictions and inertia. We also document evidence of public crowding out, spousal co-insurance and of responsiveness to products bundling.