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Q: Financial status at retirement ( Answered 4 out of 5 stars,   0 Comments )
Subject: Financial status at retirement
Category: Business and Money > Finance
Asked by: viergutz-ga
List Price: $40.00
Posted: 26 Dec 2005 21:45 PST
Expires: 25 Jan 2006 21:45 PST
Question ID: 610021
I would like to know how many people are "financially successful" at
retirement age-65 years old.  I define "financially successful" as
someone who when they retire are earning as much or more than before
they retired. This is income only derived from their own investments
and savings over the course of their career, not from social security,
their family, second jobs, or other secondary incomes.

Clarification of Question by viergutz-ga on 27 Dec 2005 08:09 PST
By secondary incomes I mean receiving charity or other sources not
related to their own efforts prior to retirement.

Request for Question Clarification by wonko-ga on 15 Jan 2006 14:45 PST
I have located a survey that provides an estimate of the percentage
retirement investors whose projected single earner social security
earnings plus their personal savings will replace 100% or more of
their preretirement income.  I have not been able to locate anything
more specifically attuned to your requirements despite having read
many academic papers and consultant reports.  If that information,
which would establish a reasonably accurate upper limit of the
percentage of the population that would meet your criteria, is
sufficient as an Answer, please let me know.



Clarification of Question by viergutz-ga on 16 Jan 2006 10:30 PST
That would be ok, but I am trying to exclude social security from
being counted as part of their income since it doesn't look like it
will be around much longer.
Subject: Re: Financial status at retirement
Answered By: wonko-ga on 16 Jan 2006 15:51 PST
Rated:4 out of 5 stars
As I will demonstrate, the difficulty with your request is that nearly
everyone depends upon Social Security for a significant portion of
their retirement income, even those earning significantly
above-average wages.  On page 14 of "Replacement Ratio" Aon Consulting
(June 2004),
even people making $250,000 per year are estimated to receive 12% of
their retirement income from Social Security.  For the average worker,
Social Security replaces about 40% of their pre-retirement wages "A
message from the Commissioner of Social Security" Social Security

There is considerable discussion as to the true extent of the Social
Security "crisis."  It appears likely that it will continue in some
form for quite some time, even if benefits are ultimately reduced
through some combination of retirement age increases and a change in
how benefits are indexed to inflation.  "Social Security: No Crisis"
by Nathan Newman (January 3, 2005) presents some
arguments for why Social Security will continue.  Another source is
"Social Security: Crisis? What crisis?" by Jeanne Sahadi, CNN/Money
(January 12, 2005)
 Unless private savings drastically increase, the country's retirees
simply cannot do without it.

"Expectations for Retirement: A Survey of Retirement Investors" The
Vanguard Center for Retirement Research (November 2004)
provides considerable insight into the financial capabilities of
people who are at least trying to save for retirement.  A survey of
804 self-described "retirement investors" found that 11% were on track
to have 100% or more of their preretirement income in retirement from
a combination of single-earner Social Security and their personal
savings.  However, these people on average are relying upon Social
Security to provide about 40% sign of that income.  These people
earned about $70,000 annually.  Curiously, those earning more,
particularly those averaging a little over $90,000 a year, were the
least prepared to replace their incomes.  Even those averaging just
slightly more than $70,000 per year were much less well-prepared.  So,
a high level of earnings is not necessarily imply one has adequate
savings to fund their preretirement income even including Social
Security benefits, let alone excluding them.  Furthermore, these
people are trying to save for retirement, whereas a significant
portion of the population is not even trying.  Therefore, this is
almost certainly a considerable overestimate of the population as a

According to the Newman source, the average worker in 2004 earned
about $35,000 per year.  At the withdrawal rate of 5% used in the
Vanguard study, the person would need $700,000 in savings/investments
to generate that much income.  Therefore, a reasonable proxy to start
with would be the number of millionaires in the country.  The
Capgemini/Merrill Lynch World Wealth Report 2005 found that "about 2.5
million Americans, or almost 1% of the population over age 15, have
more than $1 million in financial assets such as stocks, bonds, and
bank accounts..." "Number of millionaires rises in Bay Area, US and
world" by Carolyn Said, San Francisco Chronicle (June 10, 2005)
 If you want to include second homes and other real estate holdings,
there were 7.5 million millionaires in the United States in 2004
"Number of millionaires hits record" by Les Christie, CNN/Money (May
25, 2005) 
Another survey excluding primary residences found that there were 8.9
million households with a net worth exceeding $1 million "Number of
millionaires hits record" by Jeanne Sahadi, CNN/Money (September 28,

As I interpret your criteria, in order to satisfy it an individual
would need to be able to replace their preretirement income from
investments and savings, which would indicate that the 2.5 million or
almost 1% sign of the population would be the closest estimate.  It is
reasonable to assume that many of these millionaires have obtained at
least a portion of their money from inheritances, which would further
reduce the number meeting your criteria.  Furthermore, even many
people with $1 million or more have not saved enough to fully replace
their preretirement earnings.  Therefore, there are likely to be very
few people in United States who meet this criteria.  Other than
self-made members of the Forbes 400 and the rare low income person who
manages to save $1 million or more, there would not appear to be many
Americans in this position.  Savings rates are simply too low, and
high incomes are no guarantee of substantial savings rates or savings
accumulation (as the Vanguard survey demonstrates).



You can download a copy of the World Wealth Report 2005 from

Search terms: retirement survey; "replacement ratio"; "number of
millionaires"; "Social Security" replacement
viergutz-ga rated this answer:4 out of 5 stars
Thanks for your help.

There are no comments at this time.

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