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Retirement Planning > Retirement Investing

Retirement Crisis Overblown, Rand, NBER Says

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The retirement crisis might not be all it’s been cracked up to be. A new report from the National Bureau of Economic Research and the Rand Corp. finds seven in 10 Americans between the ages of 66 and 69 are “adequately prepared” for the consumption levels required for a successful retirement. This despite dire predictions of readiness for retirement on the part of baby boomers and older cohorts, made worse by the economic downturn of recent years.

“Our main finding is that a substantial majority, about 71%, of those just past the usual retirement age are adequately prepared for retirement in that they will be able to follow a path of consumption that begins at their current level of consumption and then follow an age-pattern similar to that of current retirees,” according to the authors, Michael Hurd and Susann Rohwedder of Study of Aging at Rand, a nonprofit research firm based in Santa Monica, Calif. “Thus we do not find inadequate preparation for retirement on average.”

However, they add that whether or not individuals are part of the 71% depend on a number of important factors; for instance the authors note 80% of married persons are adequately prepared compared with just 55% of those who are single. Also, 89% of college graduates are prepared for retirement compared with 70% of those without a high school education.

Social Security plays its part, with the authors noting that a reduction in Social Security benefits of 30% would reduce the number of those adequately prepared by 7.8% among married people and by as much as 10.7% among singles.

Nonetheless, the authors’ assessment of the adequacy of economic preparation for retirement is much more optimistic than similar research. They point to the Center for Retirement Research at Boston College, for instance which finds that 51% of working age households are at risk of not being able adequately fund their retirement, a finding the authors are quick to discount.

“Among the early baby boomers, 41% are at risk with the implication that 59% are not at risk or are adequately prepared,” the RAND authors note. “We would expect that the early baby boomers, who were 51-56 in 2004, will have greater resources when they reach 66-69 than our sample had. The implication is that more than 71% of early baby boomers are on track to be adequately prepared.”


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