A Proposal for Retirement Risk Measurement Based on Subjective Assessment of Income: An Empirical Study

We propose a novel approach to retirement risk and its measurement. We define retirement risk as a shortfall of financial resources to meet the needs of a retiree’s household, which is different from the inability to maintain a standard of living in retirement. Taking a subjective approach to risk, we operationalise it using the Leyden approach to estimate the minimum satisfactory income for a retiree household and compare it to the pension value. Using a logistic regression model, we estimate the effect of pension value and household and reference person characteristics. The retirement risk level strongly depends on the pension value, household composition, and the reference person’s education attainment level, which also moderates the impact of the pension. This paper contributes to the literature by proposing a subjective retirement risk measurement method and offering a methodological tool that can be used with similar data from other countries.