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What drives retirement income worries in Europe? A multilevel analysis

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Abstract

Nations in Europe have been developing rapidly since the formation of the European Union (EU), not only socially and demographically, but economically as well. One question a number of countries will face during this period of structural transition will be how (and how well) they are able to support their citizens in old age. A related question involves whether individuals worry about their financial future in retirement, and the extent to which they take active steps to save in order to ensure an adequate standard of living. In this study, we analyze data from the third wave of the European Social Survey, which represents 21,416 working adults from 23 countries in Europe. We used multilevel modeling to focus on the explanatory factors that underlie individual and country-level effects in worry about future retirement income and saving behavior. Findings suggest that once individual-level dimensions are taken into account, country-level predictors explain appreciable variance in worry, but not saving practices. Moreover, we found that retirement income worries are more severe in countries with a strong projected increase in future population aging and a high level of income inequality. Finally, pension age reforms were not found to appreciably affect retirement income worries. Results of the study are discussed in terms of not only the individual difference dimensions that precipitate future income worry and saving, but also ways in which macro-level policy initiatives could potentially alleviate some of the worries of European citizens.

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Notes

  1. We were initially concerned that the dichotomously scored saving indicator might not be sufficiently sensitive to identify cross-national differences in saving practices. To establish convergent validity for the ESS measure of saving, mean household saving rates for 19 of the 23 countries used in this study were drawn from Eurostat (Leetmaa et al. 2009) and correlated with ESS country-specific mean saving scores. The Kendall’s tau rank-order correlation between these two variables showed a reliable trend (τ = 0.29, p = 0.09), which suggests that the country-specific saving rates, as measured in this study, are a reflection of actual saving practices.

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Acknowledgments

This research was supported, in part, by a visiting scholar award to the first author by the Tilburg University Network for Studies on Pensions, Aging and Retirement (NETSPAR). Support for this work was also generously provided by the Netherlands Interdisciplinary Demographic Institute. The authors are indebted to Arieke Rijken, Niels Schenk and Aat Liefbroer for conversations regarding the statistical analyses. Correspondence may be addressed to the first author.

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Correspondence to Douglas A. Hershey.

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Communicated by H. W. Wahl.

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Hershey, D.A., Henkens, K. & van Dalen, H.P. What drives retirement income worries in Europe? A multilevel analysis. Eur J Ageing 7, 301–311 (2010). https://doi.org/10.1007/s10433-010-0167-z

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