Mind the gap: inheritance and inequality in retirement wealth

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Lukas Brenner
Oscar A. Stolper

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 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.

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Author Biographies

Lukas Brenner, University of Marburg

Lukas Brenner received his doctorate at the Behavioral Finance Research Group in 2020. Among other projects, he has worked on the impact of consumer fraud on the financial wellbeing of private households and on the role of friends and family when it comes to providing a financial safety net for individuals.

Oscar A. Stolper, University of Marburg

Prof. Dr. Oscar Stolper has chaired Marburg University’s Behavioral Finance Research Group since 2014. In his research, he focuses on analysing the decision behaviour of households in their role as financial market participants. He is member of various academic associations and actively contributes to inform the work of policy-makers and practitioners.