What drives retirement income worries in Europe? A multilevel analysis

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.Keywords Retirement income Á Worry Á Saving Á Europe Á Economic Á Multilevel modeling One major change many Europeans will face in the coming decades has to do with the level of financial support they can expect to receive in old age, due to the shifting dynamics of pension financing systems in different countries. This is particularly true in previous Eastern Bloc nations, in which pension financing systems are being built (or rebuilt) to meet the needs of large segments of older workers nearing retirement. One predictable consequence of this change is worry on the part of the individual worker, who may not have a sense that a reasonable level of financial support is forthcoming. In this study, we focus attention on the factors predictive of future retirement income worry in Europe, and the factors predictive of saving for old age.The broad theoretical framework that supports this study explicitly recognizes that a range of multidisciplinary influences shape individuals' financial behaviors, as well as their financially linked emotions. That being the case, in order to characterize the determinants of financial worry and saving for old age, we employ indicators drawn from the fields of psychology, sociology, and economics. By

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