Do Households Have a Good Sense of Their Retirement Preparedness?
AbstractThe National Retirement Risk Index (NRRI) measures the percentage of working-age households who are ‘at risk’ of being financially unprepared for retirement today and in coming decades. The calculations show that even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, 44 percent will be ‘at risk’ of being unable to maintain their standard of living in retirement. An extension of the analysis to account explicitly for health care costs in retirement raises the share of ‘at risk’ households from 44 percent to 61 percent. This brief examines whether households have a good sense of their own retirement preparedness — do their retirement expectations match the reality that they face? Do people ‘at risk’ know that they are ‘at risk?’ The first section summarizes the NRRI and compares households’ self-assessed preparedness to the objective measure provided by the NRRI. The second section describes the characteristics of households associated with being too optimistic or too pessimistic. The last section of this brief introduces health care costs into the analysis.
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Bibliographic InfoPaper provided by Center for Retirement Research in its series Issues in Brief with number ib2008-8-11.
Length: 9 pages
Date of creation: Aug 2008
Date of revision: Aug 2008
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This paper has been announced in the following NEP Reports:
- NEP-AGE-2008-12-14 (Economics of Ageing)
- NEP-ALL-2008-12-14 (All new papers)
- NEP-CBE-2008-12-14 (Cognitive & Behavioural Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Annamaria Lusardi & Olivia S. Mitchell, 2006.
"Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth,"
Working Papers, University of Michigan, Michigan Retirement Research Center
wp114, University of Michigan, Michigan Retirement Research Center.
- Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(1), pages 205-224, January.
- Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth," CeRP Working Papers 54, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- Lusardi, Annamaria & Mitchell, Olivia S., 2006. "Baby boomer retirement security: The roles of planning, financial literacy, and Housing wealth," CFS Working Paper Series 2006/20, Center for Financial Studies (CFS).
- Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: the Roles of Planning, Financial Literacy, and Housing Wealth," NBER Working Papers 12585, National Bureau of Economic Research, Inc.
- Alicia H. Munnell & Mauricio Soto & Anthony Webb & Francesca Golub-Sass & Dan Muldoon, 2008. "Health Care Costs Drive Up the National Retirement Risk Index," Issues in Brief, Center for Retirement Research ib2008-8-3, Center for Retirement Research, revised Mar 2008.
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