Is There Really a Retirement Savings Crisis? An NRRI Analysis

Alicia H. MunnellAnthony Webb Francesca N. Golub-Sass

IB#7-11

Introduction

The National Retirement Risk Index (NRRI) has shown that even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, nearly 45 percent will be ‘at risk’ of being unable to maintain their standard of living in retirement.  That is, these households are projected to have replacement rates — retirement income as a share of pre-retirement income — that fall more than 10 percent short of a target rate designed to maintain their pre-retirement living standard.  More realistic assumptions regarding earlier retirement and reluctance to annuitize 401(k) balances or tap housing equity would put the percentage ‘at risk’ considerably higher, as would the inclusion of rapidly growing health care costs.  Yet, recent academic articles and press stories question whether Americans are facing a retirement income crisis…