Retirement in Latvia: Many Face Tough Choice Between Working or Cutting Expenses
Upon retirement, many Latvians will have to make a difficult decision – either continue working or significantly reduce spending, as the first and second pension pillars will only provide 40–50% of previous income. A survey shows 55% of respondents believe at least 1,500 euros per month is needed for a decent life, while the average pension is below 625 euros.
Experts from CBL Asset Management warn that discussions about early withdrawal of third-pension-pillar savings may seem attractive in the short term, but in the long run, they would weaken one of the most important tools for securing income in old age. The third pillar is becoming increasingly significant for financial safety, so any changes allowing withdrawals before retirement age should be assessed very cautiously.
According to the experts, the first and second pillar savings after retirement will provide only about 40–50% of pre-retirement income for most people. In many cases, this will not be enough to maintain the previous standard of living. Those with insufficient savings may have to choose between continuing to work or substantially cutting monthly expenses after retirement.
A survey conducted by CBL Asset Management reveals a significant gap between public expectations and projected retirement income. Although the average pension in Latvia is less than 625 euros per month, more than half (55%) of residents believe that at least 1,500 euros per month is necessary for a dignified life in retirement. Financial experts also point out that Latvians still underutilize the third pension pillar – only about one-third of economically active people contribute to it, and many start doing so relatively late. If early withdrawals from the third pillar were allowed, there is a risk that even more people would give up long-term pension savings.
