That Prudential commercial

Prudential, the insurance company, has a commercial in which they ask people to place stickers at the age of the oldest person they know, thereby creating a histogram with its peak in the early 90s. Patrick Honner has commented that this seems like a way to fool the quantitatively unsophisticated into thinking they will live into their early 90s and therefore saving more – and giving more money to Prudential.

I don’t think this is true. Rather, people shouldn’t be planning to live only to the average lifespan – or even to the average lifespan conditioned on the fact that they’re still alive – when they do their retirement planning. Then anybody who has the good fortune to live longer than their life expectancy will be broke! It would make more sense to plan as if you will live longer than, say, 95% of people – then you only have a 5% chance of outliving your money.

And this seems like a good way of intuitively getting at “name a high percentile of the distribution of people’s lifespans”, which is necessary since people aren’t good at thinking distributionally. If you think of someone you know who lived to 90, you’re going to think “that could be me. I might live to 90. I’d like to have the money for that.”

2 thoughts on “That Prudential commercial

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