Saver Heterogeneity and the Challenge of Assessing Retirement Saving Adequacy

Abstract

Determining whether a particular household is saving enough for retirement, and estimating the fraction of a population cohort that is on track in retirement planning, are complicated by substantial heterogeneity in household spending needs during retirement years. Longevity, health status, capital market returns, and whether family networks will prove a source of support or a drain, all vary significantly across households. It is possible to calibrate each of these sources of uncertainty, but different modeling approaches can yield different answers. Differences in approach explain part of the disagreement about the fraction of U.S. households that are saving adequately for retirement.