Measuring the adequacy of retirement savings

John Burnett, Kevin Davis, Carsten Murawski, Roger Wilkins, Nicholas Wilkinson

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper introduces four metrics for quantifying the adequacy of retirement savings, taking into account all major sources of retirement income. We then apply them to projections of expected future retirement income streams of a representative sample of the Australian population aged 40 and above. We find that omitting one or more pillars of savings significantly biases estimates of retirement savings adequacy. We also find that the four metrics are only weakly correlated with key commonly used indicators of financial well-being, in particular current income and net worth. Our analysis also points to several shortcomings of the widely used income replacement ratio as an indicator of savings adequacy.

Original languageEnglish
Pages (from-to)900-927
Number of pages28
JournalReview of Income and Wealth
Volume64
Issue number4
DOIs
Publication statusPublished - Dec 2018

Keywords

  • D14
  • D91
  • Financial literacy
  • Household finance
  • Life-cycle consumption and savings
  • P46
  • Retirement savings

Cite this