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How Will The Rise In 401(K) Plans Affect Bequests?

Author

Listed:
  • Alicia H. Munnell

    (Center for Retirement Research)

  • Annika Sunden
  • Mauricio Soto
  • Catherine Taylor

Abstract

This brief explores how the shift from defined benefit to defined contribution pension plans might affect bequests and thereby consumption and saving. Bequests can occur under two different types of circumstances: (1) individuals plan to leave an inheritance for their heirs (an intended bequest); or (2) individuals have no specific inheritance plans, but die before consuming all of their assets (an unintended bequest). This brief concludes that both types of bequests will increase as retirees receive more of their pension benefits as lump-sum amounts rather than as annuity payments, which provide a lifetime stream of income.

Suggested Citation

  • Alicia H. Munnell & Annika Sunden & Mauricio Soto & Catherine Taylor, 2002. "How Will The Rise In 401(K) Plans Affect Bequests?," Issues in Brief ib-10, Center for Retirement Research.
    • Handle: RePEc:crr:issbrf:ib-10
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    File URL: http://crr.bc.edu/briefs/how-will-the-rise-in-401k-plans-affect-bequests/
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    References listed on IDEAS

    as
    1. Andrew D. Eschtruth & Long C. Tran, 2001. "A Primer on Reverse Mortgages," Just the Facts jtf-3, Center for Retirement Research.
    2. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-577, June.
    3. Jeffrey R. Brown & James M. Poterba, 1999. "Joint Life Annuities and Annuity Demand by Married Couples," NBER Working Papers 7199, National Bureau of Economic Research, Inc.
    4. Jeffrey R. Brown & Olivia S. Mitchell & James M. Poterba, 2000. "Mortality Risk, Inflation Risk, and Annuity Products," NBER Working Papers 7812, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ivica Dus & Raimond Maurer & Olivia S. Mitchell, 2003. "Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities versus Phased Withdrawal Plans," Working Papers wp063, University of Michigan, Michigan Retirement Research Center.
    2. Ivica Dus & Raimond Maurer & Olivia S. Mitchell, 2005. "Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities," NBER Working Papers 11271, National Bureau of Economic Research, Inc.
    3. Duxbury, Darren & Summers, Barbara & Hudson, Robert & Keasey, Kevin, 2013. "How people evaluate defined contribution, annuity-based pension arrangements: A behavioral exploration," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 256-269.

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