Measuring Adequacy of Retirement Savings

John Burnett, Kevin Davis, Carsten Murawski, Roger Wilkins () and Nicholas Wilkinson
Additional contact information
John Burnett: Towers Watson
Kevin Davis: Australian Centre for Financial Studies; Department of Finance, Monash University; and Department of Finance, The University of Melbourne
Carsten Murawski: Department of Finance, The University of Melbourne
Nicholas Wilkinson: Towers Watson

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This article introduces four metrics quantifying the adequacy of retirement savings taking into account all major sources of retirement income. The metrics are applied to a representative sample of the Australian population aged 40 and above. Employers in Australia currently make compulsory contributions of 9.25 per cent of wages and salaries to tax-advantaged defined-contribution employee retirement savings accounts. Our analysis reveals that compulsory retirement savings, even when supplemented by the means-tested government pension and private wealth accumulation, are not in general sufficient to fund a comfortable lifestyle during retirement. We further find that omitting one or more ‘pillars’ of saving will significantly bias estimates of retirement savings adequacy. Our analysis also points to several shortcomings of the widely-used income replacement ratio as an indicator of savings adequacy.

Keywords: Retirement savings; financial literacy; life-cycle consumption and savings; household finance (search for similar items in EconPapers)
JEL-codes: D14 D91 P46 (search for similar items in EconPapers)
Pages: 43pp
Date: 2014-03
New Economics Papers: this item is included in nep-age and nep-ger
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://melbourneinstitute.unimelb.edu.au/downloads ... series/wp2014n05.pdf (application/pdf)

Related works:
Journal Article: Measuring the Adequacy of Retirement Savings (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2014n05

Access Statistics for this paper

More papers in Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Sheri Carnegie ().