National Retirement Risk Index: How Much Longer Do We Need to Work?

The National Retirement Risk Index (NRRI) measures the share of American households “at risk” of being unable to maintain their pre-retirement standard of living in retirement. The NRRI is determined by comparing households’ projected replacement rates – retirement income as a percentage of pre-retirement income – with target rates that would allow them to maintain their living standards. A recent update shows that, in the wake of the financial crisis and the Great Recession, 51 percent of today’s working households are at risk.1 But a key assumption of the NRRI is that people retire at age 65. Clearly if people worked longer, the percentage at risk would decline. This brief adapts the NRRI calculations to address the question: At what age would the vast majority of households be ready to retire? The discussion proceeds as follows. The first section lays out the nuts and bolts of the NRRI and explains how it has been adapted for this analysis. Projected replacement rates are calculated not only for the generally assumed retirement age of 65, but also for every potential retirement age between 50 and 90. These replacement rates are then compared to a target rate to determine the percentage of house-holds “ready” for retirement at each age. The second section presents the results, showing the cumulative percentage of households ready for retirement at dif-ferent ages, with breakdowns by income and current age.2 The third section addresses how much longer households have to work beyond age 65 to be pre-pared for retirement. The final section concludes that over 85 percent of households would be prepared to retire by age 70. Thus, many individuals will need to work longer than their parents did, but they will still be able to enjoy a reasonable period of retirement, es-pecially as health and longevity continue to improve.