Is There Really a Retirment Savings Crisis?
Alicia H. Munnell, Anthony Webb, and Francesca Golub-Sass
(2007) Center for Retirement Research at Boston College

The National Retirement Risk Index (NRRI) has shown that even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, nearly 45 percent will be ‘at risk’ of being unable to maintain their standard of living in retirement. That is, these households are projected to have replacement rates — retirement income as a share of pre-retirement income — that fall more than 10 percent short of a target rate designed to maintain their pre-retirement living standard.

As is implied by the snippet above this small brief enters the discussion of dissaving and asset price declines as the baby-boomers retire. Often, this discourse has furthermore been framed in the context of a global process of dissaving and subsequent 'asset-price meltdown' as a result of the joint process of ageing amongst the world's developed economies. I shall not enter this discussion here. The brief in question does however highlight the inescable truth that given the main underlying reason for the observed life cycle of saving and consumption to smooth consumption so that retiremen living standard does not deviate from work life standard households and savers will need to adjust.

Thus, a good report card for older households in 1992 is fully consistent with an NRRI of 32 percent for those 51-61 in 2004. And, unless households begin to save more or work longer, the NRRI will continue to increase as the Social Security Normal Retirement Age rises to 67, the shift from defined benefit plans continues, retirement periods become longer with increased life expectancy, and the one-income couple virtually disappears. Yes, there really is a retirement savings crisis.