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Researchers : What Replacement Rates Should Households Use?
Complete Description:Common financial planning advice calls for households to ensure that retirement income exceeds 70 percent of average pre-retirement income. We use an augmented life-cycle model of household behavior to examine optimal replacement rates for a representative set of retired American households. We relate optimal replacement rates to observable household characteristics and in doing so, make progress in developing a set of theory-based, but readily understandable financial guidelines. Our work should be a useful building block for efforts to assess the adequacy of retirement wealth preparation and efforts to promote financial literacy and well-being. Authors’
Date Published:Tuesday, September 1, 2009
Author:John Karl Scholz and Ananth Seshadri
Funding Agency: Social Security Administration
Type: Working paper;
Source: Survey data;
Language: English
Audience: Researcher