Retirement Saving Adequacy and Individual Investment Risk Management Using the Asset/Salary Ratio

Loading...
Thumbnail Image
Penn collection
Wharton Pension Research Council Working Papers
Degree type
Discipline
Subject
Economics
Funder
Grant number
License
Copyright date
Distributor
Author
Hammond, P. Brett
Richardson, David P
Contributor
Abstract

This chapter uses the Asset-Salary Ratio (ASR) to examine the factors that increase the likelihood that defined contribution plan participants will have sufficient assets to generate adequate retirement income, similar to the defined benefit plan full-funding ratio. We apply this measure to a sample of TIAA-CREF participants, and we show that participant assets are on average consistent with at least a 70 percent income replacement ratio. Key factors explaining success are an adequate contribution rate and long tenure in the system; having a portfolio weighted to equities is beneficial but to a lesser extent. Thus good funding and early participation is more important than ‘chasing returns.’ Measures such as the ASR can help participants make more informed choices.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2009-09-01
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
The published version of this Working Paper may be found in the 2010 publication: Reorienting Retirement Risk Management (http://pensionresearchcouncil.wharton.upenn.edu/publications/books/reorienting-retirement-risk-management/)
Recommended citation
Collection