The impact of hyperbolic discounting on asset accumulation for later life : a study of active investors aged 65 years and over in Japan

Asset accumulation in later life is a pressing issue in Japan due to the growing gap between life expectancy (87.14 years for women, 81.09 years for men in 2023) and the retirement age (65 or less). This gap heightens financial insecurity, emphasizing the need to meet asset goals by 65. Hyperbolic discounting, driven by present-biased preferences, often hinders this process, but empirical evidence for those aged 65 and older remains limited. Moreover, prior research has overlooked the varying impacts of hyperbolic discounting across different wealth levels. This study addresses these gaps by analyzing data from 6709 active Japanese investors aged over 65 (2023 wave) using probit regression. Wealth thresholds are categorized into four levels: JPY 20 million, JPY 30 million, JPY 50 million, and JPY 100 million. The results show that hyperbolic discounting significantly impairs asset accumulation at the JPY 100 million level but not at lower thresholds. This effect likely reflects the complex nature of hyperbolic discounting, which primarily affects long-term savings and investments. The findings underscore the importance of addressing hyperbolic discounting in later-life financial planning. Recommendations include implementing automatic savings plans, enhancing financial literacy, and incorporating behavioral insights into planning tools to support better asset accumulation outcomes.