In theory, estate planning should work as follows (based on the life-cycle theory developed by the Italian Nobel laureate in economics, Franco Modigliani): individuals save money when their incomes are high, with the intention of using these savings when their incomes decrease. If everything goes as planned, this approach helps smooth abrupt changes in one's lifestyle that could occur when, upon reaching retirement, their incomes reduce. The reality, at least in Europe, doesn't necessarily follow this model; even in old age, many individuals do not spend the savings they have accumulated (in over 50% of cases, people continue to accumulate money).
According to the results published in a paper titled "Do Retired Europeans Decumulate Their Wealth? The Importance of Bequest Motives, Precautionary Saving, Public Pensions, and Homeownership," authored by two professors, Luigi Ventura (Professor of Economics at Sapienza University of Rome) and Chales Yuji Horioka (Professor at Kobe University), on average, Europeans do not decumulate but rather increase their savings by 6.6% over a three-year period, with less than half of them choosing to spend some of their savings. Why do elderly Europeans continue to save? Some of the answers are particularly interesting:
In conclusion, the authors believe that the prevalence of elderly individuals who are reluctant to decumulate their savings will not lead to an overall increase in the propensity to consume as the population continues to age. To reverse this trend, given that the desire to leave an inheritance to heirs is the predominant motivation for saving, consumption among the elderly could be stimulated by increasing inheritance taxes, thereby reducing the incentive to accumulate assets for the purpose of leaving an inheritance.
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