Abstract
Replacement rates have become accepted as a useful metric for assessing the conditions of retirees and households at the point of retirement. We use data from the SHARE longitudinal database to investigate income dynamics within a comparative European context. Our analysis, centering on households as opposed to the individuals on whom international data commonly focus, reduces replacement rates to their components — pension, labor income, etc — and looks at the dynamics among household members in relation to work and pension income. Total replacement rates vary widely among the fourteen countries sampled: overall replacement rates of around the Bismarckian 70% across the entire sample, 80% in countries that have Social Democratic and Continental social-policy regimes, and 60% in countries that have Eastern European and Middle Eastern regimes. Looking the pension and wage components, however, the latter accounts for about 30% of household income—an important fact for decision-makers to consider. Couples tend to retire together, especially if close in age, and labor income compensates amply for lower pension income. The Gini coefficients are compared before/after retirement to determine whether the social programs that underlie pensions mitigate income inequality after retirement. Post-retirement ability to move on the income ladder is another measure of equality. Finally, we examine the well-being and quality of life of retirees and their households. We find a positive correlation between replacement rate and indicators of retirees’ and their households’ quality of life, e.g., satisfaction with life, ability to consume healthcare services, and ability to cover unforeseen expenses.
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
Economic and Demographic Perspectives on Aging
KEYWORDS
REPLACEMENT RATE, SOCIAL-POLICY REGIME, INCOME DISTRIBUTION, RETIREMENT
