NCPA - National Center for Policy Analysis

RETIREMENT PREPAREDNESS

July 30, 2007

Many people are more prepared for retirement than the retirement/investment industry want us to believe, according to a study by economists at the University of Wisconsin and the Urban Institute.

According to the study's authors:

  • Some 84.4 percent of Americans are estimated to have enough resources to carry them through life, including nursing home stays; of the 15.6 percent who fall short, the typical shortfall is not severe.
  • Only about 5 percent of the top 30 percent of earners are expected to have a problem, and only 12.7 percent of college graduates are expected to have a problem.

Unfortunately, not all fears can be alleviated, say the authors:

  • You are in danger if you're in the bottom 30 percent of income, don't have a high school diploma and are single.
  • Also, home equity plays a large role in wealth; when the researchers excluded only half of home equity, the percentage of households that had enough assets fell from 85.6 percent to 61.2 percent.
  • Finally, the study assumes that Social Security will deliver the retirement income it has promised, at least to those in this age group; but if Social Security benefits were cut by 25 percent, the researchers found that 37.2 percent of households would not have saved enough to compensate.

Source: Scott Burns, "We're more prepared for retirement than we think, study says," Dallas Morning News, July 30, 2007; based upon: John Karl Scholz, Ananth Seshadri and Surachai Khitatrakun, "Are Americans Saving "Optimally" for Retirement?" University of Wisconsin/Urban Institute, Journal of Political Economy, 2006, Vol. 114, No. 4.

For study text:

http://www.ssc.wisc.edu/~scholz/Research/Optimality.pdf 

 

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