Morning Must-Read: Alicia Munnell et al.: Are Retirees Falling Short?

Alicia Munnell et al.: Are Retirees Falling Short?: “Data from the Survey of Consumer Finances and studies using target income replacement rates indicate a widespread shortfall….

…Researchers using a life-cycle model… conclude that most pre-retirees have an optimal level of wealth…. The comforting results of the optimal savings research depend crucially on two as- sumptions–that households’ consumption declines when the kids leave home and that households plan on declining consumption in retirement…. The target replacement rate analysis assumes that consumption does not decline when the kids leave
home and that retirees plan on level consumption in retirement. The question is which view best reflects the real world.

March 18, 2015

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