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Maintaining one’s living standard at old age: What does that mean?

Author

Listed:
  • Christian Dudel

    (Ruhr-Universität Bochum)

  • Notburga Ott

    (Ruhr-Universität Bochum)

  • Martin Werding

    (Ruhr-Universität Bochum and CESifo Research Network)

Abstract

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 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.

Suggested Citation

  • Christian Dudel & Notburga Ott & Martin Werding, 2016. "Maintaining one’s living standard at old age: What does that mean?," Empirical Economics, Springer, vol. 51(3), pages 1261-1279, November.
    • Handle: RePEc:spr:empeco:v:51:y:2016:i:3:d:10.1007_s00181-015-1042-8
    DOI: 10.1007/s00181-015-1042-8
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    Cited by:

    1. Christian Dudel & Julian Schmied, 2019. "Pension adequacy standards: an empirical estimation strategy and results for the United States and Germany," MPIDR Working Papers WP-2019-003, Max Planck Institute for Demographic Research, Rostock, Germany.
    2. Sonja Spitzer & Angela Greulich & Bernhard Hammer, 2018. "The Subjective Cost of Young Children: A European Comparison," VID Working Papers 1812, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
    3. Schmied, Julian, 2023. "The replacement rate that maintains income satisfaction through retirement: The question of income-dependence," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    4. Christian Dudel & Julian Schmied, 2023. "Pension benchmarks: empirical estimation and results for the United States and Germany," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 171-188, June.

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    More about this item

    Keywords

    Retirement; Living standard; Replacement rate; Pensions; Satisfaction;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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