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Getting on Track for a Sustainable Retirement: A Reality Check on Savings and Work


  • Pfau, Wade Donald


The aim of traditional retirement planning is to set a wealth accumulation target for your retirement date so that your desired expenditures can be obtained using a “safe” withdrawal rate. But it is quite difficult to know if you are making progress toward this target. Volatility over short periods of time strongly limits the usefulness of using your current wealth accumulation at ten or even five years before retirement to predict your final retirement wealth. Fortunately, it is not necessary to focus on a retirement wealth accumulation target. The accumulation and retirement phases should not be treated separately in this way. This paper outlines a framework for considering if someone in mid-career is on track for a sustainable retirement. It investigates what combinations of savings rates and years of continued work would have allowed someone to have always accumulated enough by retirement to afford one’s desired retirement expenditures in all of the rolling periods from the historical data. A strategy is “safe” if it worked in the worst-case offered thus far by history. I consider a 55 year old as a case study to show what savings rate will be needed to retire 10 years later, or how much longer one should work with a variety of other savings rates. Results are shown for a wide variety of situations. These findings can potentially serve as a reality check about the sustainability of one’s retirement plans.

Suggested Citation

  • Pfau, Wade Donald, 2011. "Getting on Track for a Sustainable Retirement: A Reality Check on Savings and Work," MPRA Paper 31900, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:31900

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    References listed on IDEAS

    1. Shiller Robert J., 2005. "Life-Cycle Portfolios as Government Policy," The Economists' Voice, De Gruyter, vol. 2(1), pages 1-9, August.
    2. Pfau, Wade Donald, 2011. "Can We Predict the Sustainable Withdrawal Rate for New Retirees?," MPRA Paper 30877, University Library of Munich, Germany.
    3. Pfau, Wade Donald, 2011. "Safe Savings Rates: A New Approach to Retirement Planning over the Lifecycle," MPRA Paper 28796, University Library of Munich, Germany.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Dan Ariely on Spending in Retirement
      by Wade Pfau in Pensions, Retirement Planning, and Economics Blog on 2011-09-03 04:06:00
    2. Retirement Planning and Worst-Case Scenarios
      by Wade Pfau in Pensions, Retirement Planning, and Economics Blog on 2011-07-02 19:45:00
    3. Getting on Track for Retirement
      by Wade Pfau in Pensions, Retirement Planning, and Economics Blog on 2011-06-29 07:57:00
    4. Why $1 Million Won't Cut It In Retirement
      by Mandi Woodruff in Business Insider on 2013-10-04 22:05:21

    More about this item


    retirement planning; lifetime perspective; safe savings rate; safe retirement age; wealth accumulation targets; retirement spending goals; safe withdrawal rates;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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