Pension adequacy standards

  • Christian Dudel Christian Dudel
  • Julian Schmied Julian Schmied

An empirical estimation strategy and results for the United States and Germany

Due to increasing life expectancy pension benefits and savings need to last longer, which casts doubt on the financial security of retirees. Surprisingly, what pension benefit level can be considered adequate remains unclear. In this paper, we propose an identification strategy for the estimation of pension adequacy standards. Applying a range of econometric techniques to data from the U.S. and Germany, we find that a net pension income of around 100% of the last net working life income, plus or minus 10 percentage points, can be considered adequate.

Keywords: Replacement rate; Pension adequacy; Retirement income; Nonparametric; estimation;
JEL Classification: J26; C14; H55; J32; D19;

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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