The Adequacy of Economic Resources in Retirement
AbstractThe most common metric for assessing the adequacy of economic preparation for retirement is the income replacement rate, the ratio of income after retirement to income before retirement. However both economic theory and common sense say that someone is adequately prepared if she is able to maintain her level of economic well-being, which is not the same as maintaining her level of income or some fixed proportion of income. Economic well-being is typically measured by consumption, which is the measure we use. We define and estimate measures of economic preparation for retirement based on a complete inventory of economic resources, particularly wealth, which we compare with optimal consumption paths. We find that a substantial majority of those just past the usual retirement age are adequately prepared for retirement in that they will be able to finance a path of consumption that begins at their current level of consumption and then follows an age-pattern similar to that of current retirees. This is not true, however, for all groups in the population. In particular, almost half of singles who lack a high school education are likely to be forced to reduce consumption. Couples are much better prepared than singles. But because of taxes a substantial number of married college graduates will have to reduce consumption.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp184.
Length: 35 pages
Date of creation: Sep 2008
Date of revision:
Contact details of provider:
Postal: P.O. Box 1248, Ann Arbor, MI 48104
Phone: (734) 615-0422
Fax: (734) 647-4575
Web page: http://www.mrrc.isr.umich.edu/publications/papers/
More information through EDIRC
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Michael D. Hurd & Susann Rohwedder, 2010. "The Effect of the Risk of Out-of-Pocket Spending for Health Care on Economic Preparation for Retirement," Working Papers wp232, University of Michigan, Michigan Retirement Research Center.
- Michael D. Hurd & Susann Rohwedder, 2011.
"Economic Preparation for Retirement,"
NBER Working Papers
17203, National Bureau of Economic Research, Inc.
- Karen Smith & Mauricio Soto & Rudolph G. Penner, 2009. "How Seniors Change Their Asset Holdings During Retirement," Working Papers, Center for Retirement Research at Boston College wp2009-31, Center for Retirement Research, revised Dec 2009.
- James M. Poterba & Steven F. Venti & David A. Wise, 2011.
"Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts,"
in: Investigations in the Economics of Aging, pages 21-69
National Bureau of Economic Research, Inc.
- James M. Poterba & Steven F. Venti & David A. Wise, 2012. "Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts," NBER Working Papers 17824, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator).
If references are entirely missing, you can add them using this form.