Maintaining One's Living Standard at Old Age: What Does that Mean? Evidence Using Panel Data from Germany
31 Pages Posted: 8 May 2013
Date Written: April 30, 2013
How much retirement income is needed in order to maintain one’s living standard at old age? As it is difficult to find a firm basis for an empirical treatment of this question, we employ a novel approach to assessing an adequate replacement rate vis-à-vis income in the pre-retirement period. We subject indications regarding satisfaction with current income as collected in the German Socio-Economic Panel (GSOEP) to longitudinal analyses, using linear fixed-effects models and fixed-effects ordered logit models as our main analytical tools. We obtain a required net replacement rate of about 87% for the year of entry into retirement as a rather robust result, while replacement rates keeping the living standard unchanged may slightly decline over the retirement period.
Keywords: retirement, living standard, replacement rate, pensions, saving, satisfaction
JEL Classification: D100, D910, H550, J320
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