Time Discounting and Economic Decision-making among the Elderly

David Huffman, Raimond Maurer, and Olivia S. Mitchell

Abstract — This research project evaluates the extent of heterogeneity in time discounting among elderly Americans, as well as its role in explaining older peoples’ key behaviors. We first show how older Americans evaluate simple (hypothetical) intertemporal choices in which payments now are compared with payments in the future. This adds to the literature on time horizon experiments by focusing on a nationally representative sample of persons age 70+. Using the indicators derived from this experiment, we show how differences in discounting patterns are associated with characteristics of particular importance in elderly populations, such as serious health and mental conditions. We then relate our discounting measure to key outcome variables including wealth, the timing of retirement, investments in health, and decisions about end of life care.

Keywords: impatience; time preference; self-control; retirement; health; insurance
JEL classifications: D01, D03, D12, D14, D90, E21, G11, I12, I13, J26