Most of today's working households could see a decline in their standard of living in retirement. That's the finding of a new analysis by the Center for Retirement Research at Boston College, which created the National Retirement Risk Index (NRRI) to measure the adequacy of retirement savings. The NRRI is defined as the percentage of working households without sufficient retirement savings or other assets to replace their pre-retirement income--even if they work to age 65 and annuitize all their financial holdings.
Between 2007 and 2010, the NRRI climbed from 44 to 53 percent--meaning more than half of working households are at risk of experiencing a lower standard of living in retirement. What accounts for the 9 percentage point increase in the NRRI between 2007 and 2010? Half of the increase is due to the decline in housing values, since home equity accounts for the largest share of household wealth. Other factors are the decline in interest rates, the rise in Social Security's full retirement age (from 65 to 67), and low stock prices.
Source: Center for Retirement Research, The National Retirement Risk Index: An Update