Journal article

Measuring the Adequacy of Retirement Savings

C MURAWSKI, John Burnett, KEVIN Davis, ROGER Wilkins, Nicholas Wilkinson

Review of Income and Wealth | Wiley | Published : 2018


This paper introduces four metrics for quantifying the adequacy of retirement savings, taking into account all major sources of retirement income. We then apply them to projections of expected future retirement income streams of a representative sample of the Australian population aged 40 and above. We find that omitting one or more pillars of savings significantly biases estimates of retirement savings adequacy. We also find that the four metrics are only weakly correlated with key commonly used indicators of financial well‐being, in particular current income and net worth. Our analysis also points to several shortcomings of the widely used income replacement ratio as an indicator of saving..

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Funding Acknowledgements

This paper uses data from the Household, Income, and Labour Dynamics in Australia (HILDA) Survey. The survey was initiated and is funded by the Australian Government Department of Social Services (DSS), and is managed by the Melbourne Institute of Applied Economic and Social Research. The findings and views based on these data should not be attributed to either the DSS or to our employers.