Looking at the transition to retirement, based on a cross-sectional analysis, it emerges that
retirement increases the chances of poverty. Women are poorer than men before retirement,
on average, but they are not more penalized by retirement. The groups that tend to be more
penalized in the transition to retirement are those living in social housing, and those having
previously been employees working less than 15 hours per week or self-employed. The
self-employed are more at risk of falling into poverty with retirement than the unemployed.
A Portuguese person that has retired before 65 years of age, and before that was an
employee working at least 15 hours per week, is relatively protected against falling into
poverty in the year of retirement. This may be explained by the mass of civil servants that
could retire before 65 in the considered period, and that had a well-built history of
contributions to social security.
Finally we have estimated several probit models of the probability of becoming poor when
retirement occurs to evaluate which characteristics make an individual more or less prone
to become poor when retiring. We have found that they are: employment status, industry,
region, type of family and being civil servant. Regarding employment status, being self
employed, having unpaid activity and, less significantly, being unemployed increases the
probability of becoming poor. Working in Manufacturing and in the Services industries
seems to decrease the probability of becoming poor in a significant way, comparing to
working in Agriculture. By region, living in Alentejo increases the probability of becoming
poor whereas living in Lisbon area reduces this probability. As to the type of family, retired
couples with children are less prone to become poor.15 Last, being a civil servant reduces
significantly the probability of becoming poor. On the other side, early retirement, gender,
and owning the house seem not to be relevant in changing the probability of becoming
poor.
Concluding, retirement in Portugal is still associated with an increased probability of
becoming poor. This is not due to a stingy social security system, but to the fact that many
individuals do not meet the requirements to apply to social security retirement benefits. As
our cohort analysis establishes, the oldest cohorts of retired individuals are the poorest. The
younger cohorts are better protected. This implies that the problem of poverty associated to
15 This is partially explained by the use of equivalised income in the analysis.
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