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Do the Retired Elderly in Europe Decumulate Their Wealth? The Importance of Bequest Motives, Precautionary Saving, Public Pensions, and Homeownership

Author

Listed:
  • Charles Yuji Horioka

    (Center for Social Systems Innovation and Research Institute for Economics and Business Administration, Kobe University, Asian Growth Research Institute, Institute of Social and Economic Research, Osaka University, and National Bureau of Economic Research, JAPAN)

  • Luigi Ventura

    (Department of Economics and Law, Sapienza, University of Rome, ITALY)

Abstract
In this paper, we use micro data on a large number of European countries from the Survey of Health, Ageing and Retirement in Europe (SHARE) to examine the wealth accumulation (saving) behavior of the retired elderly in Europe. To summarize our main findings, we find that less than half of the retired elderly in Europe are decumulating their wealth and that the average wealth accumulation rate of the retired elderly in Europe is positive though relatively moderate (6.6% over a 3-year period). These findings strongly suggest that the Wealth Decumulation (or Retirement Saving) Puzzle (the tendency of the retired elderly to not decumulate their wealth or to decumulate their wealth more slowly than expected) applies in the case of Europe. Moreover, our regression results suggest that bequest motives, generous public pension systems, and the reluctance of retired elderly homeowners to sell or borrow against their owner-occupied housing are the primary explanations for the existence of the Wealth Decumulation Puzzle in Europe.

Suggested Citation

  • Charles Yuji Horioka & Luigi Ventura, 2022. "Do the Retired Elderly in Europe Decumulate Their Wealth? The Importance of Bequest Motives, Precautionary Saving, Public Pensions, and Homeownership," Discussion Paper Series DP2022-34, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2022-34
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    References listed on IDEAS

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    More about this item

    Keywords

    Aged; Bequests; Bequest intentions; Bequest motives; Dissaving; Elderly; Europe; Household saving; Inheritances; Intergenerational transfers; Life cycle model or hypothesis; Precautionary saving; Retired elderly; Retirement Saving Puzzle; saving; SHARE; Wealth accumulation; Wealth decumulation; Wealth Decumulation Puzzle;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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