“The Reality of Retirement Income: Baltic Residents Need at Least 70% of Current Income for Financial Security, Survey Finds”

In order to spend financially secure retirement years, on average, half of the Baltic population would need more than 70% of their current income, only 4% of the respondents could live with less than half of their income. The population of Latvia more often than the population of the other Baltic states believe that for financial stability in old age they would need an even higher income than at present, according to a population survey conducted by Luminor banka*.

Every fifth or 21% of the population of Latvia would like to receive more income in retirement than at present, while in Lithuania and Estonia 12% and 10% respectively. The inhabitants of Lithuania more often than the inhabitants of other Baltic countries think that 71-80% of their current income in retirement would be enough for them – this answer is noted by 18% of Lithuanians, while in Latvia and Estonia the same number, or 10% of respondents. Every fourth Baltic resident (26%) had difficulty answering this question.

“Unfortunately, the residents’ wishes are far from reality, especially in Latvia. Comparing the net monthly salary to the average state pension, OECD data for 2020 shows that the so-called replacement ratio was 55.3%¹. This means that the state pension does not provide the kind of income that would provide residents with financial comfort and a sense of security. In addition, it should be taken into account that the tax-paying population of working age, from whom state pensions are paid, will continue to decrease.² Therefore, you should not rely only on state support, and you should start saving for your old age in good time. The types of savings can be very different – contributions to pension level 3, savings in a savings account, investments in real estate or investments in the stock or bond market. The most important thing is that the savings are made and really serve as a safety cushion when you reach your senior years,” says Atis Krūmiņš, head of Luminor’s asset management and pensions department in the Baltics.

Latvian residents in the age group from 30 to 39 years would prefer retirement income that would exceed 70% of current income more than other age groups. On the other hand, residents in the age group from 40 to 49 could more often live with an income that would be up to 50% of the current income.

Incomes in the amount of 71-80% of the current income as sufficient when reaching retirement age are most often indicated by residents with higher education and managers. The survey shows that residents who currently receive an income of up to 1,000 euros per family member most often believe that in retirement they would need a higher income than before, while those who currently receive more than 1,000 euros per month, more often than others, 91 -100% of current income. Those respondents who are not married or divorced would also need more funding.

*Luminor Bank’s population survey was conducted in April and May 2023 in cooperation with research agency Norstat, surveying 3,005 Latvian, Lithuanian and Estonian respondents aged 18 to 74.

1 Pensions at a Glance : Pension replacement rates (oecd.org)

2

Luminor