Do People Save Enough for Retirement?

Alicia H. Munnell, Boston College and TIAA-CREF Institute Fellow

May 2005 |

This report looks at how much income individuals need in retirement and summarizes results from economic studies on the adequacy of individuals’ retirement savings. It also discusses how housing equity should be considered as part of retirement wealth, the impact of reductions in Social Security benefits, and the shift from defined benefit plans to defined contribution plans on Americans’ preparedness for retirement. Highlights of the report include:

  • Middle-class households need about 65 to 75 percent of pre-retirement income to maintain their standard of living in retirement.
  • Economic studies have found that, generally, about half of the baby boomers are on track to accumulate enough retirement wealth to main their pre-retirement living standards.
  • When considering retirement wealth, including a portion of home equity (say, 50 percent) seems reasonable.
  • The future looks grimmer because Social Security will decline relative to pre-retirement income even under the current law, and the decline could be even greater if benefit cuts are part of the solution to the program’s financing problems. Moreover, the shift from defined benefit plans to defined contribution plans has not produced expected levels of retirement saving.

© 2013 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017