Replacing Family Income During the Retirement Years: How Are Canadians Doing?

Analytical Studies Branch Research Paper Series No. 328

23 Pages Posted: 12 Jun 2011

Date Written: July 29, 2010

Abstract

This paper examines the extent to which family income during working years is "replaced" during the retirement years. It does so by tracking cohorts as they age from their mid-50s to their late 70s, using a taxation-based longitudinal data source that covers 26 years from 1982 to 2007. Earlier work by the same authors examined this question with respect to the 50% of the population with strong labor force attachment during their mid-50s. This paper extends that work to include almost all Canadians (80% to 85% of the population). The adult-equivalent-adjusted family income available to the "median" individual during his or her late 70s is about 80% of that observed when the same person was in his or her mid-50s (a replacement rate of 0.8). Replacement rates in retirement are negatively correlated with income earned around age 55. Median replacement rates are 1.1 among individuals in the bottom income quintile, 0.75 in the middle quintile, and 0.7 in the top quintile. In retirement, public pensions and other transfers more than “replace” earnings and other income of bottom quintile individuals. However, some individuals have very low replacement rates. For example, 20% of individuals in the middle income quintile had replacement rates below 0.6. More recent cohorts had higher family incomes in retirement than did earlier cohorts as a result of higher earnings and private-pension income.

Keywords: retirement, pensions, replacement rates, seniors’ income

Suggested Citation

LaRochelle-Côté, Sébastien and Picot, Garnett and Myles, John, Replacing Family Income During the Retirement Years: How Are Canadians Doing? (July 29, 2010). Analytical Studies Branch Research Paper Series No. 328, Available at SSRN: https://ssrn.com/abstract=1862247 or http://dx.doi.org/10.2139/ssrn.1862247

Sébastien LaRochelle-Côté (Contact Author)

Statistics Canada ( email )

Ottawa, Ontario
Canada
613-951-0803 (Phone)

Garnett Picot

Statistics Canada ( email )

Ottawa, Ontario
Canada
613-951-8214 (Phone)
613-951-5403 (Fax)

John Myles

Statistics Canada ( email )

Ottawa, Ontario
Canada

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