Half of households will not be able to maintain their standard of living when they retire, according to the latest findings of the National Retirement Risk Index from the Center for Retirement Research at Boston College.
“The National Retirement Risk Index: Version 2.0” measures the share of working-age households that qualify as being at risk of being unable to maintain their pre-retirement standing of living once they retire. The index is measured by comparing households’ projected replacement rates, which is their retirement income as a percentage of pre-retirement income, versus the target rates that would allow them to maintain their living standard. Approximately half of the nation’s working-age households currently are at risk of falling short of maintaining their standard of living even if they work to age 65 and annuitize all their assets, including receipts from a reverse mortgage on their home, according to the index.
Source: BenrfitsPro
Of great debate with many variables is the retirement income replacement percentage. Most literature will say 70-80% income replacement is necessary. But that depends on the desired lifestyle and to what extent living expenses are reduced, if at all, in retirement.
The average retiree can count on about 40% replacement from Social Security, but that percentage drops as income increases.
I maintain the goal should be to replace 100% of base pay. That does not count any income above that base pay. Such a level also provides a cushion for inflation.
But what good are targets, when so many Americans will not be able to maintain their standard of living?
QUINNSCOMMENTARY 
Do we really need a replacement rate? In retirement I spend much less than before retirement. Just removing retirement savings saves 30%. Removing commuting and work clothing another 10%.
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It just now occurred to me… We just downsized and signed a thirty year mortgage. I’m 75. Ironic. I’ll never make it. I realize this is a secured loan, but do other seniors have problems obtaining consumer credit with lower incomes?
If you don’t have $400 for an emergency, and you can’t borrow, what do you do?
Americans Have So Much Debt They’re Taking It to The Grave
Money, Mar 22, 20172
“New data shows that 73% of American consumers die in debt. The average total balance left over is $61,554 (and that includes mortgage debt)”
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I’m 67 with just $43,224 in retirement income per year. I had no problem getting 20 credit cards with a total of $69,000 credit available, over the last five years.. Also, got a $21,762 auto loan @ 4.19% 10 months ago with zero down. I only carry a balance on credit cards that have zero interest, or it gets paid in full every month. I am not sure I could live as well as I do, if I lived anywhere but Montana. We have no sales tax and I paid $23 in state income tax in 2021. I have not done my taxes for 2022 yet, but I don’t believe it will change much. We have hydroelectric power and natural gas and my cost for both average just $100 per month. Living large in Montana on average income.
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Yes indeed. My property taxes alone are $14,000 and that’s a condo, not a house.
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I know Dad retired on Social Security only and I think three of my sisters did also. (Dad taught us asking about someone else’s income was rude.)
But Dad had seven kids to help, and sisters also had two or more kids each. We keep in touch on FB and by phone, and they all seem to be doing well in retirement.
Andrew Biggs (ex SS director) said a lot of people can retire on SS alone because they have been poor their whole lives and are used to it.
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If we can get the half that don’t have enough to be the folks that die before the average life span, then there would be less of a problem.
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Except it isn’t near half
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Baloney.
According to the latest data from the United States Census Bureau, the median annual income for individuals aged 65 and older is $47,620. Keep in mind that 11+MM Americans (of 58MM Americans) are in the workforce today – despite the “Great Retirement” or “Great Dislocation” during the pandemic.
Look at today’s retirees. How did they respond. They are not spending all of their savings. They are actually adding to savings – more often than not. How can that be?
They change behavior as necessary. Just like you do. You go to the store and ground beef is $5+ a pound. So, you change your buying habits – you buy chicken, or pork or go meatless. You do it without thinking (other than bitchin about prices).
Yes, those who have below median household incomes are probably not saving enough. For them, though, the greatest risk is in how Congress addresses sustainability issues for Social Security and Medicare.
The idiots dawdle … Seems like all have adopted the mantra “not on my watch” or they have no guts to tell Greatest Generation, Silents, Baby Boomers, and Gen X that they promised more than the taxes they put in place – to buy votes – hoping to shift the liability to those too young to vote, or generations yet unborn.
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Since people have been hitting age 65 and above every year since way before this country was founded, maybe we should see how they fared when old age struck. Those currently in old age would be more pertinent to the question at hand. That would be a good indicator instead of predicting X number won’t have some target income in the future.
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Given the life expectancy overall and from age 65, they didn’t have much time at all, plus many more were in poverty and many lived with multi generational families.
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For current circumstances I was referencing the cohort of those age 65-95 today. That includes most readers of this blog and yourself. The idea of income replacement is discussed repeatedly but in real life how does it work? You have expressed the need for 100% salary replacement and most others say 70-85% replacement rate. But does that match up with the current old timers, of which I am one.
The wife and I didn’t retire with 100% replacement and our standard of living didn’t drop the next day. Life went on as usual and continues as usual years later. We bought new vehicles after retiring, not immediately but as replacement was needed. We have taken more trips and helped the grandkids. We replace furniture, appliances, etc. as needed. This is why I say the need to look at how the retired are faring rather than making predictions about future retirees living in old vans under the viaduct because they didn’t have 70%-100%.
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I believe that more than half of households will be able to maintain their standard of living when they retire. Why? Just like the government they have financed their standard of living by debt. The question is will they be able to retire?
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