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By: FEDweek StaffData used in various reports warning that many workers face an inadequate income in retirement are accurate overall, a new report has found, in the wake of a study that concluded that those figures understate retirement income.
Following that study, “some observers have questioned whether other surveys more frequently used by retirement researchers also understate retirement income and, if so, whether prior research suggesting that many households are unprepared for retirement is accurate,” says the new report by the Center for Retirement Research.
It said that one commonly used measure, called the current population survey, does fail to capture a significant part of actual income, but that three others capture nearly all of it and “provide largely consistent estimates across the income distribution.”
The new report also says that studies use different “replacement rates”–comparing pre-retirement and post-retirement income–in their assessments of whether retirement income will be adequate, ranging from as low as 55 percent to as high as 91 percent needed. Splitting the difference and using a target replacement rate of 75 percent, “estimates imply that between 42 and 60 percent of households are at risk of falling short,” it says.
