Patience Is the Secret to Wealth and Health, Economists Suggest in a New Study

They say patience is a virtue; it’s probably also a blessing.

How much would you accept in a year’s time instead of $100 today? Let’s hope, for your sake, you picked a sum not too much greater.

More patient people grow richer and healthier than their more impetuous peers, according to a new study that compares elderly Americans’willingness to delay financial gratification with their personal characteristics and lifetime outcomes.

Older people are an impatient bunch, apparently. More than half of the almost 600 surveyed, all aged over 70, specified more than $160 to wait a year, and quite a few—mainly the very old—more than $200.

Overall, their average discount rate—the implied rate of interest that would render them indifferent to waiting or not—was a whopping 54%, around twice as high as the level most other studies find for younger and middle-aged people.

Growing impatience with age might well make sense.

«If you only have six months left to live, then it doesn’t make much sense to think about long term,» said Olivia Mitchell, a professor of risk at theWharton School, who undertook the analysis.

Respondents diagnosed with dementia or Alzheimer’s—which affects more than 11% of men and 16% of women over age 71 in the U.S. — revealed levels of impatience 35% higher than the average. For cancer sufferers and those with heart conditions, levels were around 13% higher.

But that doesn’t explain the huge variation across people of the same age, which has potentially significant costs. Patience boosts wealth by much more than marriage or religion. Respondents with discount rates more than one standard deviation above the average of the sample had 29% less net wealth, a loss of around $130,000. More impatient people—similarly controlling for religion, income, race, sex, optimism and education—were more likely to smoke, drink excessively, and miss out on their flu shots and medical examinations.

The study, carried out with David Huffman fromUniversity of Pittsburg, also found whites’ discount rates were systematically 11% lower than nonwhites’. An extra year of education inculcated a 2 percentage-point reduction in discount rates.

People who put less emphasis on the future might make decisions in and before retirement that expose them and their families to greater risks, the authors concluded.

«They might not talk to their children about the distribution of assets, power of attorney, long-term care insurance, and end-of-life medical-care costs,» Ms. Mitchell said in an interview. «Whether people are born with patience is a fascinating yet unstudied question; I’ve been working on financial literacy for years and it’s my view it can be taught.»

The shift around the world away from publicly funded defined-benefit plans toward individual privately managed retirement accounts will be more problematic if older folk have a tendency to run down their savings too soon or invest too little in riskier equities, say, which might have a greater longer-run payoff.

Governments could even take advantage of such psychology: «I’ve had state treasurers talk to me about the possibility of offering retired public servants a pension buyout…which could be less than the expected present value than has been promised to them,» Ms. Mitchell said.

One final puzzle is why market interest rates, which are plumbing near zero in many countries, are such a small sliver of the individual discount rates implied here and in similar studies. Indeed, economics would suggest a longer-living and higher-saving population might drag interest rates down—but perhaps not if it were made up of more old and impatient people.

«The motives behind purchases of financial assets, and the mechanisms determining interest rates, are not fully understood,» the authors said.