Mean and pessimistic projections of retirement adequacy

Abstract


 
 
 Retirement adequacy is estimated using a 1995 United States sample of households. Based on mean lognormal portfolio projections and current contribution rates, 52% of households are adequately prepared for retirement. Based on pessimistic projections, only 42% of households are adequately prepared. A regression of the ratio of projected wealth to needs at retirement shows that adequacy increases with stock share (mean projection) and the impact increases with time until retirement. With pessimistic projections, there is no significant relationship between stock share and the adequacy ratio. Planned retirement age and household spending behavior are each significantly related to the adequacy ratio. © 1998 Elsevier Science Inc. All rights reserved.
 
 

The Role of Financial Education in the Management of Retirement Savings

“…Also, the current research linking retirement investment and financial education is focused on the participation and contribution rate decision; research focusing on the asset allocation decision is lacking. 3 Bajtelsmit, Bernasek, and Jianakoplos [1999], Reichenstein [1998], Yuh, Hanna, and Montalto [1998], and Hariharan, Chapman, and Domian [2000 study the link between investor's risk tolerance and their asset allocations in retirement funds, but they do not investigate the link between knowledge of finance and asset allocation. In this paper we investigate the effect of education in finance on the asset allocation decisions in the investor's retirement savings.…”

Projection of Retirement Adequacy using Wealth-Need Ratio: Optimistic and Pessimistic Scenarios

“…considered as a proxy for retirement consumption, and Yuh et al [8] and Yao et al [9] who also used the same approach in estimating retirement needs in their studies. Retirement wealth can be defined as adequate if the total retirement income is equal or greater than the total desired retirement consumption.…”

“…Retirement wealth can be defined as adequate if the total retirement income is equal or greater than the total desired retirement consumption. The conceptual framework is summarized as follows [8]:…”

Does the Employees Provident Fund Provide Adequate Retirement Incomes to Employees?

“…Associated with Modigliani and Brumberg [8] as cited in Li et al [2], the standard life-cycle hypothesis is commonly adopted to analyze household consumption and savings behaviour including savings for retirement. In general, researchers conclude that the life cycle hypothesis holds whereby the retirement wealth is defined as adequate if the total retirement income is equal or greater than the total desired retirement consumption [9], [10]. Also, the hypothesis states that the accumulation of assets actively takes effect during an individual's work life to finance the consumption in retirement.…”