New National Retirement Index

Posted by on May 29, 2007

A New National Retirement Index
Alicia Munnell and Anthony Webb, Center for Retirement Research at Boston College

Americans weaned on post-war affluence have come to expect an extended period of leisure at the end of their work life. And, indeed, the majority of today?s retirees are able to afford a decent retirement. However, this group is living in a ?golden age? that will fade as Baby Boomers and Generation Xers reach traditional retirement ages in the coming decades. This gloomy prediction reflects the trend towards longer retirements and likely declines in retirement incomes relative to pre-retirement earnings ? known as replacement rates.

Because many Americans appear unaware of these disquieting trends, the Center for Retirement Research at Boston College has developed the National Retirement Risk Index. The Index measures the share of working-age households who are at risk of being unable to maintain their pre-retirement standard of living in retirement.

The Index shows that, even if people retire at age 65 and households annuitize all their wealth including the receipts from reverse mortgages on their homes, 43 percent will be at risk. But the situation is not hopeless ? if people choose to work longer ? even just two years ? and save 3 percent more, they can substantially improve the outlook for their retirement security.

http://www.bc.edu/centers/crr/ib_48.shtml