Author
Listed:
- Michael D. Hurd
(RAND and NBER)
- Susann Rohwedder
(RAND)
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.
Suggested Citation
Michael D. Hurd & Susann Rohwedder, 2008.
"The Adequacy of Economic Resources in Retirement,"
Working Papers
wp184, University of Michigan, Michigan Retirement Research Center.
Handle:
RePEc:mrr:papers:wp184
Download full text from publisher
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Citations
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Cited by:
- Michael D. Hurd & Susann Rohwedder, 2011.
"Economic Preparation for Retirement,"
NBER Chapters, in: Investigations in the Economics of Aging, pages 77-113,
National Bureau of Economic Research, Inc.
- Matthew Weinzierl, 2014.
"Seesaws and Social Security Benefits Indexing,"
Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 137-196.
- Aaron George Grech, 2013.
"How best to measure pension adequacy,"
CASE Papers
case172, Centre for Analysis of Social Exclusion, LSE.
- Grech, Aaron George, 2013.
"How best to measure pension adequacy,"
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46126, University Library of Munich, Germany.
- Grech, Aaron George, 2013.
"How best to measure pension adequacy,"
LSE Research Online Documents on Economics
51270, London School of Economics and Political Science, LSE Library.
- 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.
- Filip Chybalski & Edyta Marcinkiewicz, 2016.
"The Replacement Rate: An Imperfect Indicator of Pension Adequacy in Cross-Country Analyses,"
Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(1), pages 99-117, March.
- 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,"
NBER Chapters, in: Investigations in the Economics of Aging, pages 21-69,
National Bureau of Economic Research, Inc.
- Matthew Weinzierl, 2014.
"Seesaws and Social Security Benefits Indexing,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 49(2 (Fall)), pages 137-196.
- Michael D. Hurd & Susann Rohwedder, 2010.
"The Effect of the Risk of Out-of-Pocket Spending for Health Care on Economic Preparation for Retirement,"
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wp232, University of Michigan, Michigan Retirement Research Center.
- repec:cep:sticas:/172 is not listed on IDEAS
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