Retirement Saving Adequacy and Individual Investment Risk Management Using the Asset/Salary Ratio
Date of this Version
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.
Working Paper Number
Opinions and conclusions are solely those of the author(s) and do not reflect views of the institutions supporting the research, with whom the authors are affiliated, or the Pension Research Council. Copyright 2009 © Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.
Date Posted: 23 August 2019
The published version of this Working Paper may be found in the 2010 publication: Reorienting Retirement Risk Management.