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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. 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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