Tuesday, March 14, 2017

Many Households Unaware of Retirement Risk

Many Americans are not prepared for retirement. Some know it, but many don't. Conversely, among households that are adequately prepared for retirement, substantial numbers think they are at risk. A recent study by the Center for Retirement Research (CRR) measured the size of each of these groups in an attempt to determine the accuracy with which households assess their retirement readiness.

The CRR study analyzed data from the National Retirement Risk Index (NRRI), which is based on the Federal Reserve Board's Survey of Consumer Finances. The NRRI defines households at risk as those whose retirement income will not be enough to replace a targeted percentage of pre-retirement earnings. The Survey of Consumer Finances also asks households how well prepared they think they are for retirement. Comparing those two measures—retirement readiness and perception of retirement readiness, the CRR study found the following...

52% of households are at risk
33% of households are at risk and they know it
19% of households are at risk and they don't know it

48% of households are not at risk
24% of households are well prepared for retirement and they know it
24% of households are well prepared for retirement and they don't know it

The 19 percent of households that are unaware of their retirement risk tend to be those with defined-contribution retirement plans and high incomes. The 24 percent that are well-prepared but think they are at risk tend to be homeowners with defined-benefit pension plans.

Source: Center for Retirement Research at Boston College, Do Households Have a Good Sense of their Retirement Preparedness?

No comments: