IDEAS home Printed from https://ideas.repec.org/p/esr/wpaper/wp575.html
   My bibliography  Save this paper

Estimating, and interpreting, retirement income replacement rates

Author

Listed:
  • Barrett, Alan
  • Nivakoski, Sanna

Abstract

Longitudinal data are used to estimate retirement income replacement rates of employees in Ireland who transition into retirement over the period 2010 to 2014. The median replacement rate is estimated at 50 per cent, with the mean at 78 per cent. The mean estimate seems high relative to stated policy goals but further analysis shows that the estimate results in part from very high replacement rates at the lower end of the income distribution. This in turn results from the flat-rate nature of social welfare pensions in Ireland. More broadly, Ireland’s pension system is shown to produce a more equal distribution of replacement rates compared to pre-retirement income. However, this leads to a question as to whether policy goals in the areas of pension adequacy should be set with respect to income or consumption levels as opposed to replacement rates.

Suggested Citation

  • Barrett, Alan & Nivakoski, Sanna, 2017. "Estimating, and interpreting, retirement income replacement rates," Papers WP575, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:wp575
    as

    Download full text from publisher

    File URL: https://www.esri.ie/pubs/WP575.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Olivia S. Mitchell & John W.R. Phillips, 2006. "Social Security Replacement Rates for Alternative Earnings Benchmarks," Working Papers wp116, University of Michigan, Michigan Retirement Research Center.
    2. Andrew G. Biggs, 2011. "Social Security: The Story of Its Past and a Vision for Its Future," Books, American Enterprise Institute, number 6033, September.
    3. Liam A. Gallagher & Fionnuala Ryan, 2017. "A Portfolio Approach to Assessing an Auto-Enrolment Pension Scheme for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 48(4), pages 515-548.
    4. Brady, Peter J., 2010. "Measuring retirement resource adequacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(2), pages 235-262, April.
    5. Sanna Nivakoski, 2014. "Determinants of Pension Coverage and Retirement Income Replacement Rates – Evidence from TILDA," The Economic and Social Review, Economic and Social Studies, vol. 45(3), pages 299-328.
    6. MacDonald, Bonnie-Jeanne & Osberg, Lars & Moore, Kevin D., 2016. "How Accurately Does 70% Final Employment Earnings Replacement Measure Retirement Income (In)Adequacy? Introducing The Living Standards Replacement Rate (Lsrr)," ASTIN Bulletin, Cambridge University Press, vol. 46(3), pages 627-676, September.
    7. Micheál L. Collins & Gerard Hughes, 2017. "Supporting Pension Contributions Through the Tax System: Outcomes, Costs and Examining Reform," The Economic and Social Review, Economic and Social Studies, vol. 48(4), pages 489-514.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. O'Toole, Conor & Slaymaker, Rachel, 2020. "Review of the Rebuilding Ireland Home Loan scheme," Research Series, Economic and Social Research Institute (ESRI), number RS104, June.
    2. Nolan, Anne & Doorley, Karina, 2019. "Financial Literacy and Preparation for Retirement," IZA Discussion Papers 12187, Institute of Labor Economics (IZA).
    3. Nolan, Anne & Whelan, Adele & McGuinness, Seamus & Maître, Bertrand, 2019. "Gender, pensions and income in retirement," Research Series, Economic and Social Research Institute (ESRI), number RS87, June.
    4. Slaymaker, Rachel & Roantree, Barra & Nolan, Anne & O'Toole, Conor, 2022. "Future trends in housing tenure and the adequacy of retirement income," Research Series, Economic and Social Research Institute (ESRI), number RS143, June.
    5. Russell, Helen & Maître, Bertrand & Privalko, Ivan, 2019. "The ageing workforce in Ireland: Working conditions, health and extending working lives," Research Series, Economic and Social Research Institute (ESRI), number RS92, June.
    6. Beirne, Keelan & Nolan, Anne & Roantree, Barra, 2020. "Income adequacy in retirement: Evidence from the Irish longitudinal study on ageing (TILDA)," Research Series, Economic and Social Research Institute (ESRI), number RS107, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kluth, Sebastian & Gasche, Martin, 2013. "Ersatzraten in der Gesetzlichen Rentenversicherung," MEA discussion paper series 201311, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. Bercholz, Maxime & Bergin, Adele & Callan, Tim & Garcia Rodriguez, Abian & Keane, Claire, 2019. "A micro-macro economic analysis of pension auto-enrolment options," Papers WP640, Economic and Social Research Institute (ESRI).
    3. Aviad Tur-Sinai & Avia Spivak, 2022. "How Generous are Societies Toward Their Elderly? A European Comparative Study of Replacement Rates, Well-Being and Economic Adequacy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(1), pages 71-105, July.
    4. James M. Poterba, 2014. "Retirement Security in an Aging Society," NBER Working Papers 19930, National Bureau of Economic Research, Inc.
    5. Chai, Jingjing & Maurer, Raimond H. & Mitchell, Olivia S. & Rogalla, Ralph, 2011. "Lifecycle impacts of the financial and economic crisis on household optimal consumption, portfolio choice, and labor supply," CFS Working Paper Series 2011/23, Center for Financial Studies (CFS).
    6. Michael D. Hurd & Susann Rohwedder, 2015. "Measuring Economic Preparation for Retirement: Income Versus Consumption," Working Papers wp332, University of Michigan, Michigan Retirement Research Center.
    7. Matthew S. Rutledge & John E. Lindner, 2016. "Do Late-Career Wages Boost Social Security More For Women Than Men?," Working Papers, Center for Retirement Research at Boston College wp2016-13, Center for Retirement Research.
    8. Shlomo Benartzi & Alessandro Previtero & Richard H. Thaler, 2011. "Annuitization Puzzles," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 143-164, Fall.
    9. Greg Kaplan & Giovanni L. Violante, 2010. "How Much Consumption Insurance beyond Self-Insurance?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 53-87, October.
    10. Ayşe İmrohoroğlu & Kyle Matoba & Şelale Tüzel, 2018. "Proposition 13: An Equilibrium Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 24-51, April.
    11. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2019. "Education Policy and Intergenerational Transfers in Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2569-2624.
    12. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2011. "The Effects of Changes in Women’s Labor Market Attachment on Redistribution Under the Social Security Benefit Formula," Working Papers wp248, University of Michigan, Michigan Retirement Research Center.
    13. Guner, Nezih & Lopez-Daneri, Martin & Ventura, Gustavo, 2016. "Heterogeneity and Government revenues: Higher taxes at the top?," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 69-85.
    14. Jonas D. M. Fisher & Martin Gervais, 2011. "Why Has Home Ownership Fallen Among The Young?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 883-912, August.
    15. Weidong Tian & Zimu Zhu, 2020. "A Portfolio Choice Problem Under Risk Capacity Constraint," Papers 2005.13741, arXiv.org, revised Dec 2021.
    16. Meritxell Solé & Guadalupe Souto & Concepció Patxot, 2019. "Sustainability and Adequacy of the Spanish Pension System after the 2013 Reform: A Microsimulation Analysis," Hacienda Pública Española / Review of Public Economics, IEF, vol. 228(1), pages 109-150, March.
    17. Joanna N. Lahey, 2017. "Understanding Why Black Women Are Not Working Longer," NBER Chapters, in: Women Working Longer: Increased Employment at Older Ages, pages 85-109, National Bureau of Economic Research, Inc.
    18. Thomas Hintermaier & Winfried Koeniger, 2016. "Debt Portfolios and Homestead Exemptions," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(4), pages 103-141, October.
    19. Gianluca Violante & Giovanni Gallipoli & Costas Meghir, 2005. "Education Decisions, Equilibrium Policies and Wages Dispersion," 2005 Meeting Papers 522, Society for Economic Dynamics.
    20. Fatih Kayhan & Mehmet Islamoglu, 2020. "A Comprehensive Assessment of Auto-Enrollment System as a Second Pillar of Pension System: The Case of Turkey," International Journal of Publication and Social Studies, Asian Economic and Social Society, vol. 5(2), pages 167-177, June.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp575. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Burns (email available below). General contact details of provider: https://edirc.repec.org/data/esriiie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.