Retirement replacement rates and saving behavior

We study whether the retirement replacement rate influences households’ saving behavior by using the RAND Health and Retirement Study data file. We estimate quantile regressions with the ratio of wealth to permanent income as dependent variable, and age dummies and the retirement replacement rate as main independent variables. Our paper is the first to explicitly link retirement replacement rates to age-wealth profiles. We are unable to conclude that the amount of financial wealth that households have accumulated around the age of 65, relative to permanent income, is decreasing in the replacementrate. However, the age-wealth profile of households in the highest quartile of the replacement rate-distribution is very flat. Finally, households hardly decumulate wealth after retirement and some groups even keep saving after retirement.

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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