National Retirement Risk Index (NRRI) Update Shows Half of Working-Age Americans Still Falling Short

Abstract

The National Retirement Risk Index (NRRI) shows the share of working-age households who are at risk of being unable to maintain their pre-retirement standard of living in retirement. The Index is constructed using the Survey of Consumer Finances (SCF), a triennial survey of U.S. households that collects detailed financial and demographic information. For SCF households, the NRRI compares projected replacement rates—retirement income as a percentage of pre-retirement income—with target rates that would allow them to maintain their living standard and calculates the percentage of households at risk of falling short. The article begins by describing how the NRRI is constructed. The second section presents the NRRI in 2013, showing that 52% of households were at risk. The third section highlights the key levers and presents the results by age, income, and type of pension coverage. The fourth section discusses the stability of the NRRI despite numerous revisions and then explains why it provides a more dire outlook than the optimal savings literature. The final section concludes that the NRRI confirms that today’s workers face a major retirement income challenge, even if they work to age 65 and annuitize all of their financial assets.