IB#10  

Introduction

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...

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Alicia H. Munnell is the Director of the Center for Retirement Research at Boston College (CRR) and the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Annika Sundén is a Research Associate of the CRR. Mauricio Soto is a research assistant at the CRR and a graduate student in Economics at Boston College. Catherine Taylor was a research assistant at the CRR and is now with Charles River Associates. This brief is adapted from a paper prepared for a conference on gifts and estates held in Woodstock, VT on October 22-23, 2001. The paper will be published in a forthcoming book from the Brookings Institution Press. The authors would like to thank Sean Barrett, Elizabeth Lidstone, Mireille Samaan, and Long Tran for extraordinary research assistance; they were all full participants in the enterprise. Early work by Jeremy Zipple also contributed to this effort. Many people were very generous in providing data, expertise, and computer code during the preparation of the paper. Alan Gustman, Tom Steinmeier, and Courtney Coile provided their computer programs for calculating pension wealth. The authors would also like to thank Bill Gale, Jonathan Gruber, Alan Gustman, James Poterba, and Tom Steinmeier for helpful comments on an earlier draft and Jeffrey R. Brown, Amy Finkelstein, and Olivia Mitchell for comments on the final paper.