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Bridging the Gap: Anticipated Shortfalls in Future Retirement Income

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  • Douglas Hershey

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  • Joy Jacobs-Lawson

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    Abstract

    Determining an appropriate and desirable income replacement rate is one of the keys to developing a successful personal financial plan for retirement. In the present investigation, we examined workers’ expectations of the pre-retirement income they believed would be necessary in order to have a “good” retirement relative to the income they anticipated they would receive. Analyses revealed an expected income shortfall, the magnitude of which was positively related to one’s income and age. Sex was also related to the magnitude of the expected shortfall, with women anticipating a larger financial discrepancy than men. Finally, a sex by marital status interaction emerged in which single women were found to have a larger shortfall than single men and married individuals of both sexes. Findings are discussed in terms of the importance of interventions aimed at educating workers to understand the value of selecting a reasonable retirement income replacement rate. Copyright Springer Science+Business Media, LLC 2012

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    File URL: http://hdl.handle.net/10.1007/s10834-012-9281-8
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    Bibliographic Info

    Article provided by Springer in its journal Journal of Family and Economic Issues.

    Volume (Year): 33 (2012)
    Issue (Month): 3 (September)
    Pages: 306-314

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    Handle: RePEc:kap:jfamec:v:33:y:2012:i:3:p:306-314

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    Web page: http://www.springerlink.com/link.asp?id=104904

    Related research

    Keywords: Retirement; Income; Replacement rate; Sex difference; Income shortfall;

    References

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    1. Andrew G. Biggs, 2011. "Social Security," Books, American Enterprise Institute, number 24949, December.
    2. Marilyn Clark-Murphy & Paul Gerrans & Craig Speelman, 2009. "Return Chasing as a Driver in Individual Retirement Savings Investment Choices: Evidence from Australia," Journal of Family and Economic Issues, Springer, Springer, vol. 30(1), pages 4-19, March.
    3. Haejeong Kim & Jinhee Kim, 2010. "Information Search for Retirement Plans Among Financially Distressed Consumers," Journal of Family and Economic Issues, Springer, Springer, vol. 31(1), pages 51-62, March.
    4. Kathleen Malone & Susan Stewart & Jan Wilson & Peter Korsching, 2010. "Perceptions of Financial Well-Being among American Women in Diverse Families," Journal of Family and Economic Issues, Springer, Springer, vol. 31(1), pages 63-81, March.
    5. Tansel Yilmazer & Angela Lyons, 2010. "Marriage and the Allocation of Assets in Women’s Defined Contribution Plans," Journal of Family and Economic Issues, Springer, Springer, vol. 31(2), pages 121-137, June.
    6. James P. Smith, 2003. "Trends and Projections in Income Replacement during Retirement," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 21(4), pages 755-782, October.
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    Cited by:
    1. Tracey West & Andrew Worthington, 2014. "Macroeconomic Conditions and Australian Financial Risk Attitudes, 2001–2010," Journal of Family and Economic Issues, Springer, Springer, vol. 35(2), pages 263-277, June.
    2. Scott Payne & Jeremy Yorgason & Jeffrey Dew, 2014. "Spending Today or Saving for Tomorrow: The Influence of Family Financial Socialization on Financial Preparation for Retirement," Journal of Family and Economic Issues, Springer, Springer, vol. 35(1), pages 106-118, March.
    3. Martie Gillen & Hyungsoo Kim, 2014. "Older Adults’ Receipt of Financial Help: Does Personality Matter?," Journal of Family and Economic Issues, Springer, Springer, vol. 35(2), pages 178-189, June.

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