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

Burnett, J., Davis, K., Murawski, C., Wilkins, R., & Wilkinson, N. (2018). Measuring the adequacy of retirement savings. Review of Income and Wealth, 64(4), 900-927. https://doi.org/10.1111/roiw.12307
Burnett, John ; Davis, Kevin ; Murawski, Carsten ; Wilkins, Roger ; Wilkinson, Nicholas. / Measuring the adequacy of retirement savings. In: Review of Income and Wealth. 2018 ; Vol. 64, No. 4. pp. 900-927.
@article{5212b15be5634c7f85c672a97ecc865d,
title = "Measuring the adequacy of retirement savings",
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.",
keywords = "D14, D91, Financial literacy, Household finance, Life-cycle consumption and savings, P46, Retirement savings",
author = "John Burnett and Kevin Davis and Carsten Murawski and Roger Wilkins and Nicholas Wilkinson",
year = "2018",
month = "12",
doi = "10.1111/roiw.12307",
language = "English",
volume = "64",
pages = "900--927",
journal = "Review of Income and Wealth",
issn = "0034-6586",
publisher = "Wiley-Blackwell",
number = "4",

}

Burnett, J, Davis, K, Murawski, C, Wilkins, R & Wilkinson, N 2018, 'Measuring the adequacy of retirement savings', Review of Income and Wealth, vol. 64, no. 4, pp. 900-927. https://doi.org/10.1111/roiw.12307

Measuring the adequacy of retirement savings. / Burnett, John; Davis, Kevin; Murawski, Carsten; Wilkins, Roger; Wilkinson, Nicholas.

In: Review of Income and Wealth, Vol. 64, No. 4, 12.2018, p. 900-927.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Measuring the adequacy of retirement savings

AU - Burnett, John

AU - Davis, Kevin

AU - Murawski, Carsten

AU - Wilkins, Roger

AU - Wilkinson, Nicholas

PY - 2018/12

Y1 - 2018/12

N2 - 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.

AB - 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.

KW - D14

KW - D91

KW - Financial literacy

KW - Household finance

KW - Life-cycle consumption and savings

KW - P46

KW - Retirement savings

UR - http://www.scopus.com/inward/record.url?scp=85026785292&partnerID=8YFLogxK

U2 - 10.1111/roiw.12307

DO - 10.1111/roiw.12307

M3 - Article

VL - 64

SP - 900

EP - 927

JO - Review of Income and Wealth

JF - Review of Income and Wealth

SN - 0034-6586

IS - 4

ER -

Burnett J, Davis K, Murawski C, Wilkins R, Wilkinson N. Measuring the adequacy of retirement savings. Review of Income and Wealth. 2018 Dec;64(4):900-927. https://doi.org/10.1111/roiw.12307