ERIC Number: ED370462
Record Type: Non-Journal
Publication Date: 1993-Jul
Reference Count: N/A
Planning For Retirement: Using Income Replacement Ratios in Setting Retirement Income Objectives.
Palmer, Bruce A.
Research Dialogues, n37 Jul 1993
This paper presents a method for higher education faculty and staff to assess pension plan objectives by determining a retirement income replacement ratio to maintain the salary-based preretirement standard of living. The paper describes the RETIRE Project which researches income replacement using the federal government's annual "Consumer Expenditure Survey" to estimate individual savings and other expenditure variables incorporated into the Project's income replacement formulas. The income replacement ratio formula's components include preretirement gross pay, preretirement taxes, preretirement savings, postretirement taxes, work-related expenses, and net change in age-related expenditures. A central section looks in detail at how the ratio formula works with a single individual and a married couple under various conditions. Two detailed tables and two figures illustrate the analysis. Further sections discuss savings rates and their effect on income replacement ratios and the effects of taxing 85 percent of social security benefits (currently proposed by the Clinton Administration). A conclusion notes that research findings indicate that those retiring in 1993 need about 69 to 82 percent of final-year salary to sustain their preretirement standard of living. (Contains 13 references.) (JB)
Publication Type: Collected Works - Serials
Education Level: N/A
Authoring Institution: Teachers Insurance and Annuity Association, New York, NY. College Retirement Equities Fund.