ISSN (Print) 0473-453X

Discussion Paper No. 1189

ISSN (Online) 2435-0982

DO THE RETIRED ELDERLY IN EUROPE
DECUMULATE THEIR WEALTH?
THE IMPORTANCE OF BEQUEST MOTIVES,
PRECAUTIONARY SAVING, PUBLICPENSIONS, AND HOMEOWNERSHIPCharles Yuji Horioka
Luigi Ventura

September 2022

The Institute of Social and Economic Research
Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan

Do the Retired Elderly in Europe Decumulate Their Wealth? The Importance ofBequest Motives, Precautionary Saving, Public Pensions, and HomeownershipCharles Yuji Horioka*(Center for Social Systems Innovation and Research Institute for Economics andBusiness Administration, Kobe University; Asian Growth Research Institute; Institute ofSocial and Economic Research, Osaka University; and National Bureau of Economic
Research)
Luigi Ventura(Department of Economics and Law, Sapienza, University of Rome)
September 2022
Abstract: In this paper, we use micro data on a large number of European countries fromthe Survey of Health, Ageing and Retirement in Europe (SHARE) to examine the wealthaccumulation (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 theirwealth and that the average wealth accumulation rate of the retired elderly in Europe ispositive 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 theretired 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 suggestthat bequest motives, generous public pension systems, and the reluctance of retired
elderly homeowners to sell or borrow against their owner-occupied housing are theprimary explanations for the existence of the Wealth Decumulation Puzzle in Europe.
Journal of Economic Literature classification numbers: D14, D15, D64, E21, H55, J14
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*Corresponding author: Charles Yuji Horioka, Research Institute for Economics andBusiness Administration, Kobe University, 2-1, Rokkodai-cho, Nada-ku, Kobe, Hyogo
657-8501, JAPAN. Email: horioka@rieb.kobe-u.ac.jp

1. Introduction
The central tenet of the life-cycle hypothesis or model of Modigliani and Brumberg(1954) is that, when people are young, they work, earn income, and save part of theirincome (accumulate wealth) in order to prepare for living expenses during retirement andthat, when people are old, they retire and finance their living expenses by dissaving(decumulating their previously accumulated wealth). Thus, the life-cycle hypothesis ormodel predicts that the elderly (especially the retired elderly) should be decumulating
their wealth and that, in the absence of bequest motives and precautionary saving arisingfrom longevity risk and uncertain future medical and long-term care expenses, theyshould be decumulating their wealth so as to precisely exhaust their wealth at the time ofdeath. Thus, examining whether or not the retired elderly are decumulating their wealthand whether or not they are doing so at the expected rate are powerful tests of the validityof the life-cycle hypothesis or model.
Many researchers have analyzed the wealth accumulation (saving) behavior of the elderlyin various countries, and most of them have found that the elderly (even the retired
elderly) continue to accumulate wealth (save) or that they decumulate their wealth(dissave) but that their rate of wealth decumulation is too slow to enable them to exhaust
their wealth at the time of death. For example, the country studies in Poterba (1994) showthat median saving rates remain positive well beyond retirement in virtually all countries.
This puzzle can be called the “Wealth Decumulation Puzzle” or the “Retirement Saving
Puzzle” (Suari-Andreu, et al., 2019, uses the term “Retirement-Savings Puzzle” andTaylor, et al., 2019, use the term “Decumulation Paradox”).
At least two explanations have been proposed for the Wealth Decumulation Puzzle. The
first explanation is that the retired elderly are continuing to accumulate wealth or are
decumulating their wealth (dissaving) more slowly than expected because they want toleave bequests and other intergenerational transfers to their children and other family
members (see, for example, Hurd, 1987, 1990, Laitner and Juster, 1996, Laitner, 2002,
Kopczuk and Lupton, 2007, De Nardi and Yang, 2014, 2016, Lockwood, 2012, 2018,
Horioka and Niimi, 2017, Niimi and Horioka, 2019, and Ventura and Horioka, 2020). The
second explanation, which of course is not mutually exclusive with the first, is that theretired elderly are continuing to accumulate wealth or are decumulating their wealth(dissaving) more slowly than expected because they are worried about longevity risk
(lifespan uncertainty) and/or the possibility of facing high medical and long-term care1expenses in the future and that they are engaging in precautionary saving in response tothese worries (see, for example, Davies, 1981, Kotlikoff, 1989, and Palumbo, 1999).
The purpose of this paper is to use micro data on a large number of European countries
from the Survey of Health, Ageing and Retirement in Europe (SHARE) to examine thewealth accumulation (saving) behavior of the retired elderly in Europe and to shed lighton whether or not they are decumulating their wealth as predicted by the simple life cycle
hypothesis and on whether or not their wealth accumulation (saving) behavior is
influenced by bequest motives, precautionary saving, and public pension arrangements.
We are particularly interested in shedding light on whether or not the Wealth
Decumulation (or Retirement Saving) Puzzle applies in Europe, and if so, what the
explanation is for the Puzzle.
This paper makes at least nine original contributions to the existing literature. First,
whereas most previous studies of the Wealth Decumulation (or Retirement Saving) Puzzle
examine the case of a particular country, we include a large number of European countries
in our analysis, making it possible to make cross-country comparisons (the only similar
study with which we are familiar is Romiti and Rossi, 2014, but this study focuses on theimpact of financial literacy). We control for inter-country differences in government
policies, institutions, customs, etc., by including country fixed effects and/or by including
country-specific variables such as the average pension replacement ratio for the country
in which the respondent lives (see, for example, Belloni, 2020). Second, to the best of ourknowledge, this is the first paper to shed light on the relative importance of bequest
motives and precautionary saving as determinants of the wealth accumulation (saving)
behavior of the retired elderly in the case of the major European countries. This is an
important contribution because, as noted earlier, the two leading explanations for why the
Wealth Decumulation (or Retirement Saving) Puzzle is observed are the presence ofbequest motives and the presence of precautionary saving arising from longevity risk
(lifespan uncertainty) and/or the possibility of facing high medical and long-term careexpenses in the future. Third and related to the second contribution, whereas Hurd (1987,
1990) and many other previous studies make use of the presence of children and othervariables as proxies for bequest intentions, our analysis is also unique in making use of
direct data relating to bequest intentions. Fourth, we make use of unique data relating toprecautionary saving arising from longevity risk (lifespan uncertainty) and/or uncertain
future medical and long-term care expenses. Fifth, we shed light on the impact of thedegree of risk aversion on the wealth accumulation (saving) behavior of the retired elderly.
2Sixth, whereas most previous studies examine the wealth accumulation (saving) behavior
of all elderly (whether working or retired), we focus on the behavior of the retired elderly.
Since it is the retired elderly rather than the working elderly who should be decumulating
their wealth (dissaving), according to the life-cycle hypothesis or model, it is important
to confine the sample to the retired elderly when examining whether or not the Wealth
Decumulation (or Retirement Saving) Puzzle is observed. Seventh, whereas mostprevious studies look at all elderly regardless of their living arrangements, we focus on
the elderly who live apart from their children because it is difficult to isolate the saving
and wealth of the elderly who are living with their children. Eighth, bequest intentions
may be endogenous so we consider if this is leading to a bias in our results. Ninth, we
consider whether the reluctance of retired elderly homeowners to sell or borrow against
their owner-occupied housing is one cause of the Wealth Decumulation (or Retirement
Saving) Puzzle.
To summarize our main findings, we find that less than half of the retired elderly inEurope 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 decumulate their wealth more slowly
than expected) applies in the case of Europe, a finding that is consistent with the findingsof previous studies for most countries. Moreover, our regression analysis of thedeterminants of the wealth accumulation (saving) behavior of the retired elderly in Europe
suggests that those with bequest intentions are more likely to accumulate wealth and show
higher wealth accumulation rates than others, which implies that the tendency of theretired elderly to not decumulate their wealth at all or to decumulate their wealth more
slowly than expected is attributable in large part to the presence of bequest motives. By
contrast, we found only limited evidence that precautionary saving arising from longevity
risk and uncertain future medical and long-term care expenses is important as an
explanation of the tendency of the retired elderly to not decumulate their wealth at all orto decumulate their wealth more slowly than expected. However, we do find that generous
public pension systems help to explain the existence of the Wealth Decumulation Puzzle
in Europe, and we also find that the reluctance of retired elderly homeowners to sell orborrow against their owner-occupied housing is another contributing factor.
The analysis in this paper is meaningful not only because it sheds light on the wealthaccumulation (saving) behavior of the retired elderly (who hold a substantial share of3household wealth), on the applicability of the life-cycle hypothesis or model, and on why
the Wealth Decumulation (or Retirement Saving) Puzzle arises but also because it has
important policy implications. For example, whether and the extent to which the retired
elderly decumulate their wealth (dissave) will determine what impact the aging of the
population will have on future trends in the aggregate household saving rate, and knowing
more about the determinants of the wealth accumulation (saving) behavior of the retired
elderly will inform us about what policies would be most effective in raising theconsumption spending and living standards of the retired elderly and alleviating theirworries about lifespan uncertainty and future medical and long-term care expenses. We
will return to the policy implications of our findings in the concluding section.
The remainder of this paper is organized as follows. In section 2, we survey the literatureon the topic of this paper; in section 3, we explain the estimation model we use for our
regression analysis of the determinants of the wealth accumulation (saving) behavior of
the retired elderly in Europe; in section 4, we explain the data source and sample selection
criteria we use for our analysis; in section 5, we present and discuss some descriptive
statistics; in section 6, we present and discuss our estimation results; in section 7, we
present and discuss the results of our robustness checks; and section 8 is a concluding
section that summarizes our findings and explores the policy implications thereof.

2. Literature Survey
In this section, we survey the literature on the topic of this paper. This paper is closely
related to at least two broad strands in the literature. First and most obviously, it is related
to the many studies have been conducted in the United States and other countries thatanalyze the wealth accumulation (saving) behavior of the elderly with the intention of
shedding light on whether the Wealth Decumulation (or Retirement Saving) Puzzle isobserved and, if so, what the possible explanations for this puzzle are. We will not survey
this literature in detail because comprehensive surveys can be found in Hurd, 1990,
Poterba, 1994, Horioka, 2010, van Ooijen, et al., 2015, De Nardi, et al., 2016, Niimi andHorioka, 2019, Suari-Andreu, et al., 2019, Ventura and Horioka, 2020, and Horioka, 2021.
Virtually all previous studies find that both precautionary saving arising from longevity
risk (lifespan uncertainty) and/or the possibility of facing high medical and long-term careexpenses in the future and bequest motives play a role in explaining the Wealth4Decumulation (or Retirement Saving) Puzzle, but they differ greatly with respect to theissue of which explanation is the more important one.
For example, Hurd (1987, 1990) concludes that bequest motives are not the explanation
for the Wealth Decumulation (or Retirement Saving) Puzzle because elderly householdswith children (who are presumably more likely to have a bequest motive) decumulate
their wealth more rapidly than those without children. However, Kopczuk and Lupton(2007) rebut Hurd’s assertion by showing that the presence of children is not a good proxy
for the presence of bequest motives and that households with children are almost as likely
as households without children to have a bequest motive (63% vs. 79%) and thathouseholds with bequest motives spend about 25 percent less on consumption
expenditures than households without bequest motives.
Alessie, et al. (1995) analyze data from the VSB panel survey that was conducted in the
Netherlands by the CentER for Economic Research at Tilburg University and find thatthe elderly with a bequest motive save more than those without a bequest motive but thatthe impact of bequest motives is statistically significant only in the representative sample
and not when rich households are added to the sample. Similarly, Alessie, et al. (1999)
analyze data from the “data panel” conducted by the same CentER and find that the
impact of bequest motives on the saving of the elderly is totally insignificant. Moreover,they find that the impact of life expectancy and health status on the saving of the elderlyis also totally insignificant. This suggests that the failure of the elderly to dissave cannot
be explained either by the presence of bequest motives or by the presence of precautionarysaving arising from longevity risk (lifespan uncertainty) and/or the possibility of facing
high medical and long-term care expenses in the future.
Turning to more recent studies, De Nardi, et al. (2010, 2016) find that precautionarysaving arising from longevity risk (lifespan uncertainty) and/or uncertain future medical
and long-term care expenses, especially the latter, are more important than bequest
motives in explaining the Wealth Decumulation (or Retirement Saving) Puzzle in the caseof the United States, and Horioka, et al. (1996), Horioka and Niimi (2017), and Niimi andHorioka (2019) obtain similar findings for Japan. By contrast, Ventura and Horioka(2020) find that bequest motives are more important than precautionary saving in
explaining the Puzzle in the case of Italy.
One reason why no consensus has yet been reached about which explanation for the5

Wealth Decumulation (or Retirement Saving) Puzzle is the more important one is that, as
Dynan, et al. (2002) and De Nardi, et al. (2016) correctly point out, it is difficult todifferentiate between the two explanations just from examining the wealth accumulation(saving) behavior of the elderly and that many, if not most people, are likely to be driven
by both motivations because the same dollar can simultaneously serve both purposes,
because both motivations encourage saving, and because both motivations are strongest
for the rich.
It is precisely for this reason that a number of authors have relied on evidence onparticipation in public insurance schemes such Medicaid in the United States (which
cover medical and long-term care expenses) and the demand for financial products suchas life insurance, lifetime annuities and reverse mortgages (the demand for which is
motivated by a desire to protect oneself against longevity risk), and long-term careinsurance (the demand for which is motivated by a desire to protect oneself against
uncertain future medical and long-term care expenses). To cite one excellent example ofthis line of research, Lockwood (2012, 2018) finds that his model cannot explain the data(in particular, the low take-up rate of annuities and long-term care insurance) unless heassumes the existence of a bequest motive.
Another novel approach that has been tried is to conduct attitudinal surveys that ask
individuals to evaluate hypothetical scenarios that contain clear trade-offs between
leaving a larger bequest and enjoying a higher quality of long-term care. For example,
Ameriks, et al. (2011) conduct such a survey and conclude that both precautionary saving
and bequest motives are important as explanations for the Wealth Decumulation (orRetirement Saving) Puzzle because they find that respondents are willing to allocate partof their end-of-life wealth to bequests and part of it to improving the quality of long-termcare. However, they find that even respondents who are willing to pay for a private longterm care facility to avoid having to enter a (lower quality) government (Medicaid)funded long-term care facility are willing to allocate only one-quarter of their end-of-life
wealth toward the cost of a private long-term care facility, which suggests that bequest
motives are surprisingly strong and that being able to leave a bequest is more importantto them than preparing for long-term care expenses (see also Ameriks, et al., 2015, 2018).
Thus, despite the existence of a large literature and the use of a number of novel
approaches, it is still an open question whether precautionary saving arising fromlongevity risk (lifespan uncertainty) and/or the possibility of facing high medical and6long-term care expenses in the future or bequest motives is the more important
explanation for the Wealth Decumulation (or Retirement Saving) Puzzle, and one
important contribution of this paper is to help resolve this issue.
The second strand of literature to which this paper is related is the literature that attempts
to assess the relative importance of various saving motives. Horioka and Watanabe (1997)
and Horioka, et al. (2000) calculate the contribution of saving for each motive to net
household saving and find that saving for precautionary purposes is far more important
than saving for the purpose of leaving a bequest in both Japan and the United States.
However, Horioka and Ventura (2022) find that the retirement motive is the mostimportant motive for saving, that saving for bequests and inter vivos transfers ranks
second, and that saving for precautionary purposes ranks third, and Horioka and Watanabe(1997) and Horioka, et al. (2000) find that saving for children’s educational and marriage
expenses are both important in Japan and that including these in saving forintergenerational transfers narrows (but does not totally close) the gap between the shareof saving for precautionary purposes and the share of saving for bequests and otherintergenerational transfers. These findings provide further corroboration that both bequest
motives and precautionary saving are important as explanations of the Wealth
Decumulation (or Retirement Saving) Puzzle but that precautionary saving may be ofgreater relative importance (see Horioka, 2021, for a more comprehensive survey of theliterature on saving motives, and Arrondel and Masson, 2006, Laferrere and Wolff, 2006,
Horioka, 2014, 2021, for surveys on the literature on bequest motives).

3. The Estimation Models
In our empirical analysis, we will analyze the determinants of whether the retired elderly
decumulate or accumulate wealth using a probit model and then analyze the determinantsof the wealth accumulation (decumulation) rate (defined as the percentage change in
wealth between the two waves) of the retired elderly using ordinary least squares (OLS).
In both analyses, we place emphasis on the impact of bequest motives and precautionarysaving on the wealth accumulation (saving) behavior of the retired elderly.

3.1. The Estimation Model for the Probit Analysis

7In our probit analysis, we analyze the determinants of whether the retired elderly
accumulate or decumulate wealth using the following dependent variable:
WEALTHACC = a dummy variable that equals one if the respondent’s wealth increased
between the two waves and zero otherwise
Turning to the explanatory variables, the ones of most interest to us are the ones relating
to bequest motives and precautionary saving. The explanatory variable related to bequests
is the following:
LARGEBEQ = the subjective probability that the respondent will leave a bequest of
150,000 euros or more and zero otherwise
We also tried including SMALLBEQ, the subjective probability that the respondent will
leave a bequest of less than 50,000 euros and zero otherwise, and MEDIUMBEQ, thesubjective probability that the respondent will leave a bequest of 50,000 euros or more
but less than 150,000 euros and zero otherwise, but they were dropped from the final
specification because their marginal effects were often not statistically significant. It
should be noted that different household members’ probabilities of bequests were
aggregated by using the max operator. We also tried using the mean probability, but thisyielded very similar results.
The explanatory variables relating to precautionary saving are as follows:
HEALTH = a dummy variable that equals one if the respondent has a positive perceptionof his or her health and zero otherwise
LIFEEXP = a dummy variable that equals one if both the respondent and his or her spouse
expect to live for more than 10 years and zero otherwise
ILLNESS = a dummy variable that equals one if the respondent suffers from a chronic or
long-term health problem and zero otherwise
PENSION = the log of gross pension income received

8

REPLRATIO = the average replacement ratio for pensions (excluding other social
benefits) in the country in which the respondent lives.
These data measure the median individual gross pension (including old-age and otherpension benefits of people aged 65-74) relative to the median individual gross earningsof people aged 50-59) in 2006 and were taken from the European Union Statistics on
Income and Living Conditions (EU-SILC), which are part of the Eurostat Data Base. They
were obtained from the following URL:
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_pnp3&lang=en
Also related to precautionary saving are the following explanatory variables relating to
the respondent’s degree of risk aversion:
HIGHESTRISK = a dummy variable that equals one if the respondent is willing to takesubstantial financial risks in order to earn substantial returns and zero otherwise
HIGHRISK = a dummy variable that equals one if the respondent is willing to take above
average financial risks in order to earn above average returns and zero otherwise
AVERAGERISK = a dummy variable that equals one if the respondent is willing to takeaverage financial risks in order to earn average returns and zero otherwise
NORISK = a dummy variable that equals one if the respondent is not willing to take any
financial risks and zero otherwise
The default category is respondents who did not respond to this question.
Learning from Alessie, et al. (1995, 1999) and Spicer, et al. (2016), we include a large
number of control variables including those relating to the respondent’s age, age squared,
gender, number of non-coresident children, educational attainment, marital status,
household wealth (net worth), and country dummies (except that country dummies were
not included for Austria and Belgium because they are the reference countries). The
reference category for gender is female, that for educational attainment is no schooling,
and that for marital status is divorced. We will not discuss these control variables in detaildue to space limitations.

93.2. The Estimation Model for the Wealth Accumulation Rate Analysis
In our analysis of the determinants of the wealth accumulation (decumulation) rate of theretired elderly using ordinary least squares, we use the following dependent variable:
WEALTHRATE = the wealth accumulation (decumulation) rate, calculated as thepercentage change in wealth between the two waves, where wealth is defined as the sumof financial assets and real assets minus liabilities. (Thus, it is negative in the case of
respondents whose wealth declined between the two waves.)
The explanatory variables are the same as in the case of the probit analysis.
Since it is likely that the behavior of those who are accumulating wealth and those whoare decumulating wealth will differ, we split the sample into those who are accumulating
wealth and those who are decumulating wealth and do separate estimations for the two
samples in addition to doing the estimation for the full sample.

4. Data Source and Sample Selection
In this section, we explain the data source and sample selection criteria we use for ouranalysis. The data source we use is the Survey of Health, Ageing and Retirement inEurope (SHARE), a longitudinal panel survey of 140,000 individuals aged 50 or older
from a large number of countries in Europe and Israel that has been conducted every 2 to
3 years since 2004. It is the European equivalent of the Health and Retirement Study(HRS), which has been conducted in the United States since 1992 by the Institute forSocial Research at the University of Michigan, and the English Longitudinal Study ofAging (ELSA), which has been conducted in the United Kingdom since 2002, and has
become a role model for several ageing surveys worldwide. For more details on thissurvey, please go to http://www.share-project.org/home0.html
In our analysis, we used data from wave 1, which was conducted in 2004-05, and wave
2, which was conducted in 2006-07. We chose these waves because they are the only
waves that included questions about leaving inheritances, which is one of the focuses ofour study, and because at least two waves are needed in order to calculate the change in10

wealth over time. Both waves were conducted in 11 countries (Austria, Belgium,
Denmark, France, Germany, Greece, Italy, Netherlands, Spain, Sweden, and Switzerland).
We confined our sample to only single-person or couple households in which both thehusband and wife are 60 or older and retired because we wanted to avoid the problem of
having to allocate saving, wealth, etc., to cohabiting household members and because thelife-cycle hypothesis or model predicts not that all elderly will decumulate their wealth,
only that the retired elderly will decumulate their wealth. We also confine our sample tohouseholds with at least one non-cohabiting child since we are interested in looking at the
impact of bequest intentions on wealth accumulation (saving) behavior and since
respondents with no living children are likely to have a weaker bequest motive, driven bydifferent motivations. We also drop observations for which all the necessary information
is not available as well as observations whose wealth accumulation rate is less than -100%
or more than 200% in order to purge the sample of outliers.
Moreover, we drop observations for which wealth in the initial and/or final waves is zeroor negative when estimating the wealth accumulation equations since we were not able tocompute wealth accumulation rates in these cases and since we believe that there may be
a large measurement or reporting error in cases in which wealth is zero or negative.
The data source that we used does not include any elderly who live in nursing homes, so
we were not able to include them in our analysis. The elderly who live in nursing homes
are more likely to be decumulating their wealth because of the high cost of nursing homes,
and thus excluding them from the analysis may have biased our conclusion toward finding
an absence of decumulation (see Ziegelmeyer, 2012).
Finally, it should be noted that, throughout our analysis, we use the weights provided by
SHARE to correct for sample selection bias.

5. Descriptive Statistics and Cross-Tabulations
In this section, we present and discuss some descriptive statistics and cross-tabulations of
the data. First, Table 1 shows descriptive statistics (means, standard deviations, and11

minimum and maximum values) for all dependent and explanatory variables we used inour econometric analysis based on the sample we used for our wealth accumulation
equations.
As can be seen from the breakdown of households by bequest intentions shown in Table
2, bequest motives are quite strong in Europe, with 90.4% of households planning to leavea bequest and only 9.6% of households not planning to leave a bequest. Moreover, 21.5%
of households plan to leave a bequest of less than 50,000 euros, 21.8% plan to leave abequest of 50,000 euros or more but less than 150,000 euros, and 47.1% plan to leave abequest of 150,000 euros or more.
Table 2 also shows data on the proportions of households accumulating and decumulating
wealth, and as can be seen from this table, more than half (56.1%) of the retired elderly
are continuing to accumulate wealth and only 43.9% are decumulating wealth. Thesefindings are quite surprising since we would expect the retired elderly to be decumulating
their wealth in order to finance their living expenses.
One possible reason for why the proportion of the retired elderly who are accumulating
wealth is so high is that there is a considerable number of retired elderly who are planningto leave bequests, as a result of which they are continuing to accumulate wealth. In orderto test this hypothesis, we stratify the sample by the size of the planned bequest andcalculate the proportion of those who are accumulating or decumulating wealth for eachsubsample. As Table 2 shows, the proportion of those who are accumulating wealth is
only 46.1% for those not planning to leave any bequests at all, whereas the proportion of
those who are accumulating wealth is much higher for those planning to leave bequests,
and moreover, this proportion increases with the size of the bequest (from 47.2% for thoseplanning to leave small bequests to 56.9% for those planning to leave medium-size
bequests and 61.8% for those planning to leave large bequests). These findings strongly
suggest that bequest motives are an important reason for why a substantial proportion of
the retired elderly are continuing to accumulate wealth, contrary to the prediction of thelife-cycle hypothesis or model.
As can be seen from the data on average wealth accumulation rates shown in Table 3, theaverage wealth accumulation rate of the full sample is positive though relatively moderate(6.6% over a 3-year period), which is surprising because we would expect the retired
elderly to be decumulating their wealth, on average.
12This figure is not shown in the table, but the average wealth decumulation rate of
respondents who are decumulating wealth is 36.6%, which seems like a reasonable figure
when we take account of the fact that the figure for the average wealth decumulation rate
pertains to a 3-year period and of the fact that we would expect the retired elderly to live
for another decade or more.
One possible reason for why the average wealth accumulation rate of the retired elderlyis positive is that they are planning to leave bequests and are moderating their rate of
wealth decumulation (or continuing to accumulate wealth) for this reason. In order to test
this hypothesis, we stratify the sample by whether or not respondents are planning to leavea bequest and the size of their planned bequest and calculate the average wealthaccumulation rate for each subsample. As Table 3 shows, the retired elderly who are notplanning to leave any bequests at all or are planning to leave only small bequests are
decumulating their wealth, with wealth accumulation rates of -12.0% and -3.0%,
respectively. By contrast, the retired elderly who are planning to leave medium-size andlarge bequests are continuing to accumulate wealth, with wealth accumulation rates of
6.0, and 14.7%, respectively. These findings strongly suggest that bequest motives are an
important reason for why the retired elderly are continuing to accumulate wealth, contrary
to the prediction of the life-cycle hypothesis or model.
Our finding that less than half of the retired elderly in Europe are decumulating theirwealth and our finding that the average wealth accumulation rate of the retired elderly inEurope is positive though small in magnitude strongly suggests that the Wealth
Decumulation (or Retirement Saving) Puzzle applies in the case of Europe, a finding thatis consistent with the findings of previous studies for most countries.
Moreover, our finding that those planning to leave large bequests are more likely toaccumulate wealth and that they show a higher wealth accumulation rate than others
strongly suggests that bequest motives are an important explanation for why the Wealth
Decumulation (or Retirement Saving) Puzzle applies in the case of Europe. However, weneed to conduct a regression analysis in order to confirm whether or not these findings
hold up even after controlling for other factors, and this is precisely what we do in thenext section.

13

6. Estimation Results
In this section, we present the estimation results of our regression analysis of the wealthaccumulation (saving) behavior of the retired elderly in Europe.

6.1. Estimation Results for the Probit Model
As can be seen from the estimation results for the full sample shown in the first columnof Table 4 (the results shown in the second and third columns of this table will be
discussed in subsection 7.4), the probability of leaving a large bequest to one’s children
has a positive and significant impact on the probability of accumulating wealth, with theestimated marginal effect implying that a 10 percentage point increase in the probabilityof leaving a large bequest is associated with a 4 percentage point increase in theprobability of accumulating wealth. This finding indicates that the retired elderly withstrong bequest motives are significantly more likely to accumulate wealth than otherretired elderly and suggests that the higher than expected proportion of the retired elderly
who continue accumulating wealth is due in large part to bequest motives.
Looking next at the impact of explanatory variables relating to precautionary saving, wefound that having a favorable subjective perception of one’s health status significantly
increases the probability of accumulating wealth, with the estimated marginal effect
implying that the retired elderly with a favorable subjective perception of their healthstatus are 7.0 percentage points more likely to accumulate wealth than other retired elderly.
This is as expected because those in good health would be expected to incur fewer medical
and long-term care expenses, which in turn would increase their probability of being able
to accumulate wealth.
By contrast, the expectation of living more than 10 years has a negative and significant
impact on the probability of accumulating wealth, with the estimated marginal effect
implying that the retired elderly who expect to live a long life are 6.3 percentage points
less likely to accumulate wealth than other retired elderly. This is somewhat surprisingsince we would expect an individual expecting to live a long life to be more likely tocontinue accumulating wealth. Perhaps those expecting to live for a long time are more
likely to decumulate their wealth because they are healthier than others and therefore
more likely to engage in travel and other leisure-related consumption.
14

Whether or not the respondent suffers from a serious or chronic health condition was
found not to have a significant impact on his or her probability of accumulating wealth.
The log of pension income as well as the average pension replacement ratio have apositive and significant impact on the wealth accumulation rate. These results are
somewhat surprising because public pensions provide insurance against longevity risk, asa result of which there is less need for precautionary saving arising from longevity risk incountries with relatively generous public pension benefits.
Moreover, being a strong risk lover has a positive and significant impact on theprobability of accumulating wealth, which is somewhat surprising since we would expect
a risk lover to be less worried about running out of wealth before passing away and hence
less likely to continue accumulating wealth.1
Thus, virtually all explanatory variables relating to precautionary saving either do nothave a significant impact on the probability of accumulating wealth or their impact is
contrary to expectation, with the only exception being that having a favorable subjective
perception of one’s health status significantly increases the probability of accumulating
wealth. This suggests that precautionary saving is not an important determinant of
whether or not the retired elderly continue accumulating wealth.
As for the impact of the other explanatory variables, the estimated marginal effects of age
and age squared imply that the probability of accumulating wealth decreases with age
until the age of 78.0. This finding is as expected since we would expect the probability ofaccumulating wealth to decrease as age increases and the end of life approaches.
Neither gender nor the number of children has a significant impact on the probability ofaccumulating wealth, and the impact of educational attainment is not clear or statisticallysignificant.
Marital status does not have a significant impact on the probability of accumulating
wealth except that the retired elderly who are married but living separately are less likely
Perhaps risk lovers are more likely to accumulate wealth because they tend to be morefinancially literate than others and therefore are more cognizant of the need to accumulate wealthand/or are better able to minimize the risks associated with wealth accumulation.
115

to continue accumulating wealth than other retired elderly, presumably because those whoare separated are less well off financially and therefore less able to accumulate wealth.
Wealth has a negative and significant impact on the probability of accumulating wealth,which is as expected since the retired elderly with more wealth to decumulate should be
more likely to be decumulating their wealth than other retired elderly and because wealthis in the denominator of the dependent variable.

6.2. Estimation Results for the Wealth Accumulation Rate Equations
As can be seen from the ordinary least squares (OLS) estimation results shown in Table
5, the probability of leaving a large bequest increases the wealth accumulation rate
(decreases the wealth decumulation rate) of the retired elderly in the full sample as wellas in the sample of those who are decumulating wealth and the sample of those who are
accumulating wealth, as expected. These findings suggest that the higher than expected
wealth accumulation rates of the retired elderly is due mostly to bequest motives. In fact,
our findings imply that lowering the probability of leaving a large bequest from thesample mean of 35.53% to zero would lower the wealth accumulation rate of the retired
elderly (as before, over a 3-year period) by 15.88 percentage points from 6.61% to -9.27%,
causing it to go from positive to negative.
Turning to the impact of the explanatory variables relating to precautionary saving, wefound that having a favorable subjective perception of one’s health status significantly
increases the wealth accumulation rate (reduces the wealth decumulation rate) of theretired elderly in all samples. This is as expected because those in good health would be
expected to incur fewer medical and long-term care expenses, which in turn would reduce
their need to decumulate wealth.
However, we found that the wealth accumulation rates of the retired elderly who expect
to live for more than 10 years and the retired elderly who suffer from chronic or longterm health problems do not differ significantly from those of other retired elderly (withone exception).
We found that the log of pension income does not have a significant impact on the wealthaccumulation rate of the retired elderly but that the average pension replacement ratio has
16

a negative and significant impact on the wealth accumulation rate. This is not surprisingbecause public pensions provide insurance against longevity risk, as a result of which
there is less need for precautionary saving arising from longevity risk in countries withrelatively generous public pension benefits, as first pointed out by Feldstein (1974).
As for the impact of risk aversion, we find that the impact of being a risk lover and ofbeing mildly risk-averse does not have a significant impact on the wealth accumulation
rate (with one exception), but being a strong risk lover significantly increases the wealthaccumulation rates of the full sample of retired elderly as well as of the retired elderly
who are accumulating wealth (though not of the retired elderly who are decumulating
wealth), which is somewhat surprising since we would expect risk lovers to engage inless precautionary saving than other retired elderly.
There are at least three ways in which to explain this apparent puzzle. First, risk aversion
can have a positive or negative effect on saving (and thus wealth accumulation) dependingon the degree of patience (the coefficient of intertemporal preference), as can be seen
below from a standard Euler equation for intertemporal utility maximization:
1

𝑖

𝑡+1
𝐸𝑡 (∆ log(𝑐𝑡+1 )) = 𝑐 𝑟(𝑐 ) ( 1+𝑖
𝑡

𝑡

−𝜃

𝑡+1

1

) + 2 𝑝(𝑐𝑡 )𝐸𝑡 ((∆ log(𝑐𝑡+1 ))2 )where 𝑟(𝑐𝑡 ) is risk aversion, 𝑝(𝑐𝑡 ) prudence, and 𝜃 a coefficient of time preference.
All else equal, all depends on the interest rate less time preference, which can be positiveor negative. If 𝜃 is large, consumption will increase and accumulation willconsequently decrease in risk aversion. Second, it seems reasonable to assume that risk
lovers will be more likely to invest in risky financial assets such as equities, which confer
a higher return, and that they are able to accumulate more wealth as a result. Third,
perhaps risk lovers are more likely to accumulate wealth because they tend to be morefinancially literate than others and therefore are more cognizant of the need to accumulate
wealth and/or are better able to minimize the risks associated with wealth accumulation.
Thus, we obtained some findings that suggest that precautionary saving is an important
determinant of the wealth accumulation rate of the retired elderly (for example, ourfinding that having a favorable subjective perception of one’s health status significantly
increases the wealth accumulation rate and our finding that a higher pension replacement
ratio significantly reduces the wealth accumulation rate), but most of our findings suggestthat precautionary saving is not an important determinant of the wealth accumulation rateof the retired elderly.
17Turning to the impact of other explanatory variables, age, age squared, the number ofchildren, and gender do not appear to have a significant impact on the wealthaccumulation rate. Educational attainment does not have a significant impact on thewealth accumulation rate of the full sample of the retired elderly and of the retired elderly
who are accumulating wealth (with one exception) but generally has a positive andsignificant impact on the wealth accumulation rate of the retired elderly who are
decumulating wealth, possibly because financial literacy increases with educational
attainment. The impact of marital status on the wealth accumulation rate is not clear
except that the retired elderly who are separated appear to have a significantly lower
wealth accumulation rate than other retired elderly. Initial wealth has a negative andsignificant impact on the wealth accumulation rate, which is as one would expect since
theory predicts that the retired elderly with more wealth should accumulate their wealthmore slowly or decumulate it more rapidly than other retired elderly.
Turning finally to the country dummies, the retired elderly have significantly higher
wealth accumulation rates in Denmark, Greece, Italy, Netherlands, Spain, Sweden, andSwitzerland than in the reference countries (Austria and Belgium), whereas the patterns
in the remaining countries (France and Germany) are less clear.

7. Robustness Checks
In this section, we conduct a number of robustness checks to shed light on how robust ourestimation results are.

7.1. Endogeneity Concerns
In principle, it is possible that bequest intentions are endogenous and that the direction of
causality is reversed, with those who are better able to accumulate wealth and/or who areable to accumulate wealth at a faster pace being more likely to have stronger bequest
intentions (higher probability of leaving a bequest). If not controlled for, this will lead toa bias in the impact of bequest intentions on wealth accumulation. We therefore estimatedour regression equations using instrumental variables, using the expectation of receiving
one or more bequests in the future (as of wave 1) and gender as instruments for bequest
18

intentions.2 The results are not shown due to space limitations, but they are available
upon request from the authors. The usual tests confirmed that these instruments are notweak and that they are not correlated with the residuals in the wealth equation.
We then performed a test of exogeneity and could not reject the null hypothesis that thevariable expressing bequest intentions is exogenous with respect to wealth accumulation.
Moreover, simultaneously estimating the main wealth accumulation equation with a Tobit
equation for bequest intentions within a conditional mixed process estimation using thesame instruments as above yields a coefficient for bequest intentions in the main equationthat is almost statistically significant (at the 10% significance level) and comparable inmagnitude to that of the baseline OLS equation. These results are also not reported forbrevity, but they are available from the authors upon request. Both of these findings
convinced us that our OLS and probit models are the preferred ones.

7.2. Estimates for the Switching Model
We have thus far used only information on bequest intentions in the second wave of
SHARE, but SHARE also collects information on bequest intentions in the first wave. In
our next robustness check, we tested whether the wealth accumulation (saving) behaviorof respondents who recently decided to leave a large bequest is different from that ofrespondents with a persistent intention of leaving a large bequest. We did so replacing thebequest probability variable with two variables: the probability of leaving a large bequestof those who intended to leave a large bequest in both waves (what we will call “stablebequest probability”) and the same probability of those who had no intention of leaving
a bequest or intended to leave only a small or medium-sized bequest in the first wave but
who switched to intending to leave a large bequest in the second wave (what we will call“reinforced bequest probability”).
As can be seen from the results for the switching model shown in Table 6, the coefficients
We use the expectation of receiving one or more bequests in the future as an instrument forbequest intentions because it is not necessarily correlated with wealth accumulation rates but islikely to be correlated with bequest intentions (for example, Niimi and Horioka, 2018, find thatthose who receive bequests and inter vivos transfers are significantly more likely to leave bequests
than those who did not receive bequests and inter vivos transfers in both Japan and the UnitedStates, as do Cannari and D’Alessio, 2008, in the case of Italy). Similarly, gender may also be
suitable as an instrument for bequest intentions since bequest intentions may differ by genderwhereas gender may not have a direct impact on wealth accumulation rates.
2

19

of both bequest probabilities are positive and significant, as expected (with one exception)
but the magnitude of the coefficient of the reinforced bequest probability is much larger
than that of the stable bequest probability in the full sample and in the sample of those
who are decumulating wealth. This finding is as expected because those who recently
decided to leave a large bequest will presumably have to accumulate wealth at a faster
speed than those who have been intending to leave a bequest for a long time in order toaccumulate the amount of their desired bequest by the time they die. Thus, this finding
constitutes further evidence that bequest intentions are the primary explanation for why
the retired elderly in Europe do not decumulate their wealth or decumulate their wealth(dissave) more slowly than expected. As for the other results of the switching model, they
are broadly similar to the OLS estimates shown in Table 5.
Thus, our finding that bequest intentions have a substantial impact on the probability ofaccumulating wealth and on the wealth accumulation rate appear to be quite robust,
holding up even if we control for the endogeneity of bequest intentions and even if wetake account of changes over time in bequest intentions. Moreover, our finding that there
is little evidence that precautionary saving has some impact on the probability ofaccumulating wealth and on the wealth accumulation rate also appears to be quite robust.

7.3. Other Robustness Checks
We tried estimating the equation designed to shed light on the determinants of whether or
not respondents accumulate wealth using a logit model rather than a probit model andfound that the estimation results were broadly consistent.
We also tried estimating the equation designed to shed light on the determinants ofwhether or not respondents accumulate wealth using an ordered logit or ordered probit
model with the three ordered categories being (1) decumulating wealth, (2) keeping
wealth more or less constant (defined as a percentage change in wealth of less than 5
percent in absolute value), and (3) accumulating wealth and again found that theestimation results are broadly consistent.
Finally, we tried replacing the subjective bequest probabilities with a dummy variable forthose who are planning to leave a large bequest and found that the estimation results arebroadly consistent and that the coefficient of the bequest-related variable remains positive20

and significant.
The results of these additional robustness checks are not reported due to space limitations
but are available from the authors upon request.

7.4. Results for Homeowner and Renter Households
We have so far been using the change in total household net worth (inclusive of owneroccupied housing) as our dependent variable. However, as Sheiner and Weil (1992), Venti
and Wise (2004), Poterba, et al. (2011), Banks, et al. (2012), Romiti and Rossi (2014),
van Ooijen, et al. (2015), Nakajima and Telyukova (2019), and Suari-Andreu, et al. (2019)
have pointed out, the elderly are often reluctant to decumulate their housing wealth due
to its illiquidity and indivisibility, transactions costs, the fact the housing is an investment
good as well as a consumption good, their desire to continue living in the same house
and/or location until death, and/or the unavailability of financial products such as homeequity loans and reverse mortgages that allow them to borrow against their housing equity,
as a result of which homeowners are more likely to leave largely unintentional bequests
behind. Not surprisingly, therefore, the wealth accumulation rates of homeowners is muchhigher than that of renters (13.4% vs, -2.4%) and renters are, on average, decumulating
their wealth, albeit very moderately. Thus, the Wealth Decumulation Puzzle applies
primarily to homeowners, which suggests that the reluctance of retired elderly
homeowners to sell or borrow against their owner-occupied housing is one cause of the
puzzle.
In light of these substantial differences in the wealth accumulation (saving) behavior of
homeowners and renters, we subdivided our sample into homeowner households andrenter households and estimated our probit equations for both subsamples as our final
robustness check. Our results for renter households will be easier to interpret because theunique characteristics of owner-occupied housing will not cloud the results.
As can be seen from Table 4, the determinants of whether respondents accumulate or
decumulate wealth are very similar for both homeowners and renters, and in particular,
the probability of leaving a large bequest has a positive and significant impact on theprobability of accumulating wealth for both groups. One interesting difference is that theprobability of accumulating wealth is significantly higher for respondents expecting to21

live more than 10 years, as expected, in the sample of renters, but that the impact ofsubjective life expectancy is negative and significant, contrary to expectation, in the fullsample and the sample of homeowners. Another difference is that the probability ofaccumulating wealth is significantly lower for respondents suffering from a chronic or
long-term health problem, as expected, in the sample of renters but that the impact ofchronic or long-term health problems is insignificant in the full sample as well as in thesample of homeowners. Thus, some of the estimation results pertaining to precautionarysaving are more satisfactory in the sample of renters than in the full sample as well as in
the sample of homeowners. By contrast, the respondent’s subjective perception of his or
her health status has a positive and significant impact on the probability of accumulating
wealth, as expected, in the full sample as well as in the sample of homeowners, but its
impact is not significant in the sample of renters.

8. Conclusions and Policy Implications
In this paper, we used micro data on a large number of European countries from theSurvey of Health, Ageing and Retirement in Europe (SHARE) survey to examine thewealth accumulation (saving) behavior of the retired elderly in Europe and to shed lighton the extent to which they are decumulating their wealth and the extent to which theirwealth accumulation (saving) behavior is influenced by bequest motives, precautionarysaving, and public pension arrangements. We were particularly interested in shedding
light on whether or not the Wealth Decumulation (or Retirement Saving) Puzzle (thetendency of the retired elderly to not decumulate their wealth or to decumulate theirwealth more slowly than expected) applies in Europe, and if so, what the explanation isfor the Puzzle.
To summarize our main findings, we found that less than half of the retired elderly inEurope 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 applies in the case of Europe, a finding that is consistent with the findingsof previous studies for most countries.
Moreover, our regression analysis showed that bequest motives have a significant impact
on wealth accumulation (saving) behavior of the retired elderly in Europe, with those22

planning to leave large bequests being more likely to accumulate wealth and showing
higher wealth accumulation rates than others. This implies that the tendency of the retired
elderly to not decumulate their wealth or to decumulate their wealth more slowly than
expected is attributable in large part to the presence of bequest motives. By contrast, wefound only limited evidence that precautionary saving arising from longevity risk
(lifespan uncertainty) and/or uncertain future medical and long-term care expenses isimportant as an explanation of the tendency of the retired elderly not to decumulate theirwealth or to decumulate their wealth more slowly than expected. However, we do findthat generous public pension systems help to explain the existence of the Wealth
Decumulation Puzzle in Europe, and we also find that the reluctance of retired elderly
homeowners to sell or borrow against their owner-occupied housing is anothercontributing factor.
These results are broadly consistent with the results of Ventura and Horioka (2020) for
Italy and in sharp contrast to the results of De Nardi, et al. (2010, 2016) for the UnitedStates and the results of Horioka, et al. (1996), Horioka and Niimi (2017), and Niimi andHorioka (2019) for Japan. Thus, it could be that the primary explanation for the Wealth
Decumulation Puzzle varies from country to country and from region to region, withbequest motives being more important in Europe and precautionary saving being more
important in Japan and the United States, perhaps because social safety nets are better
developed in Europe, alleviating the need for precautionary saving.
Turning next to directions for further research, we plan to extend this line of research in
the future by breaking down household wealth into its various components (financial
assets, real assets, and liabilities) and examining differences among the various
components in the speed of decumulation and in the determinants of decumulation. As
already noted in subsection 7.4, Romiti and Rossi (2014), van Ooijen, et al. (2015),
Nakajima and Telyukova (2019), and Suari-Andreu, et al. (2019) have found that one of
the main explanations for the Wealth Decumulation (or Retirement Saving) Puzzle could
be that a large share of retirees' wealth is in the form of owner-occupied housing, that they
are reluctant to decumulate such wealth for the reasons discussed in subsection 7.4, as aresult of which such wealth is more likely to be left behind as an unintended bequest. Our
proposed research will enable us to shed light on whether this finding holds in the case of
the major European countries.
We turn finally to the implications of our findings. First, our finding that the wealth23

accumulation rate of the retired elderly is negative once we eliminate the impact of large
bequests implies that the wealth accumulation (saving) behavior of the retired elderly inEurope is consistent with the life-cycle hypothesis or model once we take account ofbequest motives and that it is appropriate to use this model when analyzing householdbehavior in the real world. Second, our finding that the retired elderly in Europe are notdecumulating their wealth, on average, implies that Europe’s household saving rate will
not decline precipitously as her population ages (see Weil, 1994). Third, our finding thatbequest motives are the primary explanation for the failure of the retired elderly in Europe
to decumulate their wealth implies that we can stimulate their consumption by raisinginheritance taxes, thereby possibly weakening their incentive to leave bequests. Fourth,
our finding that public pension benefits alleviate the need for precautionary saving andincrease the wealth decumulation rates of the retired elderly suggests that increasing thegenerosity of public pension benefits will, for better or worse, stimulate the consumption
and increase the wealth decumulation of the elderly. Fifth, our finding that the Wealth
Decumulation (or Retirement Saving) Puzzle applies primarily to homeowner households
suggests that increasing the availability of financial products such as home equity loans
and reverse mortgages that allow retired elderly homeowners to borrow against theirhousing equity would also stimulate the consumption and increase the wealthdecumulation of the elderly.

Acknowledgements
We are grateful to Junya Hamaaki, Shinya Kajitani, Wataru Kureishi, Colin McKenzie,
Joel Mpoy, Yoko Niimi, Shizuka Sekita, Midori Wakabayashi, Xiangyun Yin, andespecially the handling editor Conchita D’Ambrosio and two anonymous referees fortheir valuable comments. This work was supported by JSPS (Japan Society for the
Promotion of Science) KAKENHI Grant Numbers 18H00870, 20H01513, and
20H05633 to Horioka.
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28

Table 1: Descriptive Statistics
Variable

Obs

Mean

Std. Dev.

Min

Max

Wealth accumulation rate

811

6.607

57.85

-100

195.635

Age

811

73.136

7.239

60

98

Age^2/100811

54.012

10.799

36

96.04

Male

811

.485

.5

0

1

Number of children

811

2.339

1.086

1

7

Primary education

811

.328

.47

0

1

Lower secondary education

811

.141

.348

0

1

Upper secondary education

811

.279

.449

0

1

Post-secondary non-tertiary

811

.028

.166

0

1

Tertiary education

811

.176

.381

0

1

Married or in a registered

811

.508

.5

0

1

Separated

811

.009

.093

0

1

Never married

811

.02

.139

0

1

Widowed

811

.345

.476

0

1

Wealth in wave 1

811

218824.03

968575.72

10025369542

Log of wealth in wave1

811

11.189

1.625

4.605

17.049Prob. of leaving a large bequest

811

35.52643.8850100

Positive health perception

811

.665

.472

0

1

Expect to live more than 10 years

811

.878

.328

0

1

Long-term health problems

811

.501

.5

0

1

Average pension replacement ratio

811

51.494

9.918

37

65

Gross pension income

811

6975.505

11458.01

1

78101

Log of gross pension income

811

7.555

2.182

0

11.266Strongly risk-loving

811

.001

.035

0

1

Risk-loving

811

.078

.268

0

1

Mildly risk-averse

811

.131

.337

0

1

Strongly risk-averse

811

.79

.407

0

1

Austria

811

.085

.279

0

1

Germany

811

.096

.295

0

1

Sweden

811

.263

.44

0

1

Netherlands

811

.086

.281

0

1

Spain

811

.009

.093

0

1

education

partnership

29

Italy

811

.043

.203

0

1

France

811

.06

.238

0

1

Denmark

811

.129

.336

0

1

Greece

811

.127

.333

0

1

Switzerland

811

.046

.209

0

1

Belgium

811

.055

.229

0

1

Data source: Authors’ calculations using data from the 2004-05 and 2006-07 waves of the Survey of Health, Ageing
and Retirement in Europe (SHARE).

30

Table 2: Proportions of Accumulators and Decumulators by Bequest Intentions
Bequest intentions
Category of

No bequest

Small bequest

households

WealthMediumLarge bequest

Total

bequest

48

105

87

167

407

11.79

25.79

21.37

41.03

100.00

53.93

52.76

43.07

38.22

43.90

41

94

115

270

520

7.88

18.08

22.11

51.92

100.00

46.07

47.24

56.93

61.78

56.09

89

199

202

437

927

9.60

21.47

21.79

47.14

100.00100.00100.00100.00100.00100.00decumulators

Wealthaccumulators

Total

Note: The first row shows frequencies, the second row shows row percentages, and the third row shows
column percentages.
Date source: Authors’ calculations using data from the 2004-05 and 2006-07 waves of the Survey of Health,Ageing and Retirement in Europe (SHARE).

31

Table 3: Wealth Accumulation Rates by Bequest Intentions
BequestNo. ofintentions

obs.

Mean

Standard

Minimum

Maximum

deviation

No bequest

74-12.038

66.774-100

166.329

Small bequest

175

-3

58.866-93.613195.054

Medium bequest

180

6.042

51.961-94.682

168.801

Large bequest

382

14.69756.688-98.959

195.635

Total

811

6.607

57.85

-99.999

195.635

Data source: Authors’ calculations using data from the 2004-05 and 2006-07 waves of the Survey of Health,Ageing and Retirement in Europe (SHARE).

32

Table 4: The Determinants of the Probability of Accumulating Wealth (Probit)
Explanatory variable
Age
Age^2/100
Male
Number of children
Primary education
Lower secondary education
Upper secondary
education
Post-secondary nontertiary education
Tertiary education
Married or in a registeredpartnership
Separated
Never married
WidowedLog of wealth in wave 1
Probability of leaving alarge bequest

Full sample

Homeowners

Renters-0.092-0.067-0.114(0.016)***(0.021)***(0.042)***

0.059

0.041

0.079

(0.011)***(0.016)***(0.028)***

0.005

0.083

-0.11

(0.029)(0.055)(0.057)**-0.0130.04-0.064(0.017)(0.036)(0.018)***-0.122-0.0730.109(0.081)(0.049)(0.207)-0.1450.034-0.019(0.085)*(0.129)(0.22)-0.093

0.031

0.073

(0.096)(0.07)(0.235)

-0.16

0.059

-0.218(0.097)*(0.109)(0.254)

0.03

0.123

0.252

(0.11)(0.083)(0.275)-0.038

0.003

0.071

(0.033)(0.044)(0.107)-0.212-0.047-0.278(0.043)***(0.132)(0.136)**-0.1050.349-0.206(0.133)(0.058)***(0.07)***-0.0430.097-0.087(0.041)(0.072)(0.06)-0.106-0.267-0.11(0.009)***(0.049)***(0.013)***

0.004

0.004

0.003

(0)***(0)***(0)***

33

Positive health perception
Expect to live more than
10 yearsLong-term health problems
Average pension
replacement ratio
Log of gross pension
incomeStrongly risk-loving
Risk-loving
Mildly risk-averse

N.

0.07

0.077

0.073

(0.029)**(0.03)***(0.074)-0.063-0.1050.102(0.038)*(0.062)*(0.044)**-0.0570.011-0.171(0.068)(0.036)(0.103)*

0.002

0.002

0.008

(0.001)***(0.001)(0.002)***0.012-0.0030.027(0.006)*(0.004)(0.018)

1.479

1.16

.

(0.06)***(0.185)***-0.037-0.0480.334(0.123)(0.061)(0.05)***-0.001-0.036-0.017(0.034)(0.021)*(0.073)

927

539

385

Note: The table shows average marginal effects. Country dummies were included but their average marginal
effects are not shown. * p<0.1; ** p<0.05; *** p<0.01.

Data source: Authors’ calculations using data from the 2004-05 and 2006-07 waves of the Survey of Health,Ageing and Retirement in Europe (SHARE).

34

Table 5: The Determinants of the Wealth Accumulation Rate (Ordinary Least
Squares)
Explanatory variable
Age
Age^2/100
Male
Number of children
Primary education
Lower secondary
education
Upper secondary

Full sample

Wealthdecumulators

Wealthaccumulators-8.605-2.591

9.253(6.480)(7.226)(6.987)

5.467

1.757

-6.394(4.547)(5.003)(4.580)1.365-1.240-1.566(5.639)(5.636)(6.374)0.556-0.1493.499(0.855)(1.354)(2.203)-14.591

29.933-22.638(20.419)(10.171)**(9.261)**-4.52726.848-6.052(19.119)(11.248)**(11.517)0.879

24.830-3.968(19.666)(11.195)*(8.613)-9.11544.812-20.514(27.431)(16.735)**(14.336)

11.01730.645-14.891(26.135)(14.247)*(8.220)-10.333-2.5544.952(6.430)(1.773)(6.023)-38.333-22.188-26.120

education
Post-secondary nontertiary
Tertiary education
Married or in aregistered partnership
Separated(9.604)***

Never married
WidowedLog of wealth inwave 1(9.087)**-18.424-23.226(13.651)*

24.228(16.819)(2.670)***(14.978)-2.861-7.28424.752(7.434)(3.677)*(8.557)**-13.163-4.07035-16.039(2.741)***

Probability of leaving
a large bequest
Positive healthperception
Expect to live more

(1.621)**(2.992)***

0.205

0.211

(0.138)***(0.037)***(0.116)*12.9057.908

10.645(4.296)**(3.278)**(5.816)*-6.435-2.059-0.314(7.702)(3.093)(8.386)-7.9385.317-9.054(8.211)(2.903)*(5.246)-0.454-0.728-0.556(0.112)***(0.177)**

1.428

1.099

-0.296(0.943)(0.350)**(0.905)0.447

than 10 years
Long-term healthproblems
Average pension
replacement ratio(0.109)***Log of gross pension
incomeStrongly risk- loving

134.714112.677(12.480)***Risk-loving
Mildly risk- averse

Germany
Sweden(9.929)***

3.691

5.749

21.755(11.662)(6.443)(13.104)

11.1065.023

26.041(2.909)***(2.975)(25.057)-10.443

10.356-11.861(4.621)**(2.868)***(3.867)**42.01922.0733.583(3.224)***(6.140)

0.897

7.628

-31.121(3.376)(2.091)***(6.671)***49.1676.683-1.290(7.509)***(3.396)*(4.351)50.23218.1788.753(5.200)***Netherlands
Spain
Italy

36

(4.080)***FranceDenmark
Greece(3.268)***(2.793)**8.354-4.159-3.179(1.868)***(1.995)*(4.157)18.436-3.874-15.999(3.816)***(1.565)**15.90925.665(3.114)***(4.393)***-37.241(4.205)***(5.832)***12.735-5.060-3.078(6.466)*(3.894)(12.904)475.335

87.862-87.148(192.709)**(240.779)(239.966)

0.25
811

0.24
401

0.29
410

Switzerland
Constant
R2
N
Note: * p<0.1; ** p<0.05; *** p<0.01.

Data source: Authors’ calculations using data from the 2004-05 and 2006-07 waves of the Survey ofHealth, Ageing and Retirement in Europe (SHARE).

37

Table 6: The Determinants of the Wealth Accumulation Rate (Switching Model)
Explanatory variable
Age
Age^2/100
Male
Number of children
Primary education
Lower secondary
education
Upper secondary
education
Post-secondary nontertiary education
Tertiary education
Married or in aregistered partnership
Separated
Never married
WidowedLog of wealth in wave 1
Probability of leaving a

Full sample

Wealthdecumulators

Wealthaccumulators-8.986-2.6469.331(6.341)(7.189)(7.058)

5.739

1.822

-6.444(4.405)(4.972)(4.633)-0.261-2.108-1.534(5.287)(5.736)(6.016)-0.046-0.1253.542(0.957)(1.394)(2.399)-12.261

31.219-22.727(19.754)(10.281)**(9.115)**-3.88028.451-6.019(19.868)(11.295)**(11.393)

1.121

26.229-3.929(19.334)(11.166)**(8.450)-5.96746.769-20.637(25.914)(16.431)**(14.375)

12.21732.100-14.926(25.519)(14.088)**(8.338)-8.946-2.1564.919(6.022)(1.887)(5.785)-36.147-21.726-26.154(10.299)***(8.877)**(13.434)*-18.461-23.298

24.226(17.203)(2.695)***(15.014)-3.631-7.81924.820(7.132)(3.733)*(8.075)**-12.829-4.123(2.735)***(1.651)**(3.107)***

0.382

0.199

0.215

38

-16.056

large bequest – stable
Probability of leaving alarge bequest –reinforced
Positive healthperception
Expect to live more than
10 yearsLong-term healthproblems
Average pension
replacement ratio
Log of gross pension(0.123)**(0.037)***(0.110)*

0.676

0.327

0.204

(0.186)***(0.066)***(0.177)11.9287.793

10.627(4.805)**(3.141)**(5.832)*-3.539-1.570-0.478(7.987)(3.416)(9.887)-7.952

5.531-9.034(7.658)(2.804)*(5.267)-0.510-0.741-0.553(0.119)***(0.117)***(0.205)**

1.185

1.019

-0.294(0.963)(0.350)**(0.924)(0.186)***(0.066)***(0.177)

incomeStrongly risk-loving
Risk-loving

Mildly risk- averse
Germany
SwedenNetherlands
Spain

110.100

113.473(19.261)***(17.827)***

6.683

6.873

21.669(10.444)(7.259)(12.708)13.6235.760

25.904(2.878)***(3.061)*(24.404)-10.295

10.381-11.861(4.643)*(2.930)***(3.881)**42.04222.565

3.524(4.946)***(3.321)***(6.807)

2.266

8.196

-31.195(3.848)(1.974)***48.142

6.787-1.398(7.580)***(3.400)*(4.242)39(7.072)***

ItalyFranceDenmark
GreeceSwitzerland
Constant

50.14418.8198.670(3.785)***(3.316)***(3.288)**7.012-3.774-3.151(2.168)***(2.022)*(3.967)18.511-3.490-16.037(3.545)***(1.676)*15.89826.342(3.118)***(4.153)***12.650-5.127-3.072(6.043)*(4.043)(12.896)487.548

88.088-90.030(191.761)**(240.484)(239.726)

0.26
811

0.24
401

0.29
410

R2
N

(4.434)***-37.296(6.206)***

Note: * p<0.1; ** p<0.05; *** p<0.01.
Data source: Authors’ calculations using data from the 2004-05 and 2006-07 waves of the Survey of Health,Ageing and Retirement in Europe (SHARE).

40