Income during retirement: Remarks on the living standard in old age

In the literature about old age pension systems it has become commoditised that people try to preserve their living standard after retirement. So, one main objective of old age pension systems is the maintenance of living standards. However, with changing demographic and economic structures, reforms instituted have led to increasingly greater individual responsibility in ensuring income sustainability during old age. Against this background, an understanding of how the income of retirees will change during retirement becomes literally vital.

The paper will give an overview of the existing income sources of households of older people. It will be shown that it is not possible to draw a consistent conclusion regarding the adjustment of income during retirement and that it is necessary to undertake empirical longitudinal analyses. The case of Germany is used to shed some light on these aspects. The analysis shows whether and how the income has changed during later life. The data used for the analysis has been taken from the German Socio-Economic Panel.

Overall it can be stated that in Germany the three tiers of the old age pension system are not coordinated – they exist independent from each other with their own logics. Therefore maintaining one’s living standard may be reached only by chance and not by premeditated actions. However, the analysis delivers only a first glimpse at the maintenance of living standards and the understanding of the sustainability and adequacy of old age income is far from satisfactory. Thus further work is called for to better address the adjustment of income during retirement.