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Mind the gap: inheritance and inequality in retirement wealth
[journal article]
Abstract Drawing on detailed German panel data, we find that gifts and inheritances substantially increase households’ private pension savings in accounts which are costly or impossible to withdraw prematurely. Back-of-the-envelope calculations suggest that (a) the average difference in bequest-induced priva... view more
Drawing on detailed German panel data, we find that gifts and inheritances substantially increase households’ private pension savings in accounts which are costly or impossible to withdraw prematurely. Back-of-the-envelope calculations suggest that (a) the average difference in bequest-induced private pension savings between heirs and non-heirs accrues to more than 40,000 euros at retirement, and that (b) it would take an average non-heir household roughly 14 years to match this gap. The sizable difference in private pension savings between heirs and non-heirs persists when we take into account other investments of heirs and non-heirs potentially intended to provide for old age. Our evidence supports the impact of gifts and inheritances on inequality in retirement wealth highlighted in recent research on intergenerational justice. We discuss several policy implications of our results.... view less
Keywords
retirement planning; household income; pension; inheritance; distribution of wealth; Intergenerational relations; justice; transfer; inequality; Federal Republic of Germany
Classification
Social Security
Free Keywords
Household finance; Retirement saving; Private pension; Intergenerational wealth transfers; Bequest; Panel on Household Finances (PHF) (wave 1 and 2)
Document language
English
Publication Year
2020
Page/Pages
p. 63-72
Journal
Intergenerational Justice Review, 6 (2020) 2
Issue topic
Intergenerational wealth transfers through inheritance and gifts
DOI
https://doi.org/10.24357/igjr.6.2.831
ISSN
2190-6335
Status
Published Version; peer reviewed