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What is an Adequate Standard of Living during Retirement?

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  • Johannes Binswanger
  • Daniel Schunk

Abstract

Many economists and policy-makers argue that households do not save enough to maintain an adequate standard of living during retirement. However, there is no consensus on the answer to the underlying question about what this standard should be, despite the fact that it is crucial for the design of saving incentives and pension systems. We address this question with a randomized survey design, individually tailored to each respondent’s financial situation, and conducted both in the U.S. and the Netherlands. Key findings include the following. Adequate levels of retirement spending exceed 80 percent of working life spending for a majority of respondents. Minimum acceptable replacement rates depend strongly on income. Households in the Netherlands are much more risk averse than U.S. households.

Suggested Citation

  • Johannes Binswanger & Daniel Schunk, 2009. "What is an Adequate Standard of Living during Retirement?," CESifo Working Paper Series 2893, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2893
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    References listed on IDEAS

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    1. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2009. "The Importance of Default Options for Retirement Saving Outcomes: Evidence from the United States," NBER Chapters,in: Social Security Policy in a Changing Environment, pages 167-195 National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    : life cycle preferences; pension reform; replacement rates; retirement saving; cross-country survey studies;

    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

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