Tulojen muuttuminen eläkkeelle siirryttäessä

Little is known about retirement and income dynamics. In part this is due to lack of data. The study is based on extensive longitudinal data of 500,000 persons from Finnish Total Statistics of Income Distribution, covering 1995–2004. The data include all register-based annual income data. We choose 2003 for our transition year for retirement and include among the retired all persons with pension income starting from 2003 and no previous pension income. For most retired persons the pension is the main source of income but some persons retire partially due to the availability of part-time pensions in Finland. Change in income is examined using several complementary income replacement ratios which are calculated using either gross or net income before and after the retirement year. In addition, the study emphasises pension replacement rates which are calculated using the ratio of all pensions granted in the person’s own right to previous real income where we have subtracted capital income from gross income. The calculations compare 2004 with either, income from 2001 or, alternatively the average real income for the five years 1997–2001.Income replacement rates which are based on actual data vary extensively and their distribution is heavily skewed to the right. The median is the best summary statistics for the location of the distribution. We report results on pension replacement ratios by sex, retirement age, and source of income (wage earner, entrepreneur, unemployed, or person who relies on some other form of transfers) and income decile group prior to retirement.