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Key Findings Details

Time Discounting and Economic Decision-making among the Elderly
David Huffman, Raimond H. Maurer and Olivia S. Mitchell
WP 2016-347

  • We find that implied Internal Rates of Return (IRR) used by our older respondents to discount future payments is 0.54.
  • IRRs rise with age, such that a 15-year increase in age from 70 to 85 would be associated with about a one standard deviation higher IRR.
  • Whites and the better-educated have lower IRRs, while people with serious health conditions implying reduced life expectancy have 11-30 percent higher IRRs. Also IRRs are 35 percent higher than average for individuals diagnosed with a cognitive condition (dementia or Alzheimer’s).
  • Net wealth is significantly lower for the least patient individuals. Additionally, the impatient are much less likely to engage in healthy behaviors and make little provision for end-of-life challenges.