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The Retirement Non-Crisis

Last update on: Mar 15 2020
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You can find many studies and reports talking about the retirement crisis in America. They explain how Americans aren’t saving enough for retirement and don’t seem inclined to. The reports usually are written by or funded by financial services firms, which have an interest in making people worried about retirement. There’s a new report out that says the situation isn’t so bad. According to this summary, the new report argues that most retirement surveys understate how prepared most people are for retirement, that is they overstate the problem. It also argues that exaggerating the crisis could have the opposite of the intended effect. People could feel so discouraged that they give up making any effort to fund retirement.

The authors are not the first to adopt the life-cycle approach, of course, but they use it to push hard on the question: What does it mean to maintain a similar lifestyle to the working years during retirement? Surely, they argue, this can’t be found by simple comparisons of preretirement and in-retirement earnings. If the worker’s later-year wages are similar to those of the middle years, then targeting retirement income that matches the conditions of the later years effectively gives that worker a higher retirement lifestyle than he enjoyed on average during the working years–because, for many years, that level of income was used on costs that no longer exist.

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