Understanding retirement replacement ratios

Researchers and financial industry professionals develop target replacement rates—the percentage of income to aim for in retirement—based on certain key factors, including spending, household characteristics, and pre-retirement earnings.

The U.S. Government Accountability Office’s (GAO) analysis of the literature found that calculating an appropriate replacement rate can be complex.

To make things easier for individual investors, the GAO reviewed what consumption in retirement looks like and how target replacement rates are developed.

We applaud the U.S. Government Accountability Office for shedding light on what these Retirement Replacement Ratios ought to be, and how they may vary from group to group.

Knowing what your ratio is, provides a good guide to how much you ought to be saving for retirement. However, turning that savings into lifelong income is more of a challenge.

Depending on personal circumstances and the expenses that make up the retirement budget, individuals need some help in achieving that income throughout retirement.

Retirement Income: A look at annuities

I agree with a lot of what’s stated in the article, especially the sentiment that:

As life expectancies lengthen, the challenge of planning a well-funded retirement that includes income also increases.

However, I would change the title of the post. If you want retirement income, then you want to do more than “look at annuities.” Action is needed.

What you really want is to “meet your retirement income goals with income annuities.”

It’s more than looking, and it’s specifically about income annuities, not just any old annuity.