Research published by the Center for Retirement Research (CCR) at Boston College concluded that the average American household must save roughly 15 percent of its annual income to sustain the same lifestyle in retirement.
The brief – entitled “How Much Should People Save?” – said that middle-income workers need the equivalent of 71 percent of their pre-retirement income to maintain their standard of living. Roughly 41 percent of a retiree’s income will come from social security, while the next largest source – 21 percent – will be derived from retirement savings plans.
The Center for Retirement Research assumes in its research that qualified households will use a reverse mortgage to generate another four percent of their annual income. One of the reasons why NRMLA has embarked on a New Reverse Mortgage Educational Campaign is to emphasize the value of reverse mortgages as part of an overall retirement planning package.
According to the brief, delaying retirement to age 70 greatly reduces the annual savings expectations workers need to meet in order to fund retirement.
A worker who starts saving at age 35 will need a 15 percent annual savings rate in order to retire at age 65. But if the same worker delays retirement until age 70, only a six percent annual savings rate is necessary.
A worker who starts saving at age 45 would need to save 27 percent annually to retire at 65. But by delaying retirement to age 70, the same worker only has to save 10 percent to maintain their standard of living after retirement.