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The use of wealth in retirement

Briefing note

There has been lots of recent research and debate on individuals’ accumulation of wealth for retirement, driven by the concern that younger generations are not saving enough. Much less attention, however, has been paid to how individuals use their wealth once in retirement. This is an important omission, since understanding more about the evolution of wealth in retirement can help shed light on:

  • the extent to which such wealth is currently used to finance spending needs in retirement (and, therefore, the extent to which younger generations may need to accumulate similar sums in order to have similar standards of living in retirement);
  • the extent to which current retired generations’ wealth is likely to be bequeathed (which has direct consequences for the resources of later generations);
  • how people manage their resources through retirement (which is of increased importance given the introduction of ‘pension freedoms’).

In this note, we summarise the findings of recent and new IFS research addressing this omission and considering the use of different components of wealth in retirement.