Alternative Measures of Replacement Rates.

Abstract

This study finds that on average those just past the usual retirement age are adequately prepared for retirement in that they will be able to follow a path of consumption that begins at their current level of consumption and then follows an age-pattern similar to that of current retirees. That pattern is similar to what would be found from a theoretically derived and estimated life-cycle model. Thus we do not find inadequate preparation for retirement on average or even at the median. This is not true, however, for all groups in the population. In particular, singles lacking a high school education are likely to be forced to reduce consumption: some 62% would have died with negative wealth had they followed the consumption path given by our data. Future research will show the extent to which this percentage is over-estimated because we did not account for differential mortality.