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National Retirement Risk Index

Planning for Retirement: Improving Retirement Preparedness for the Next Generation

Originally published September 2015

The National Retirement Risk Index (NRRI) is published by the Center for Retirement Research (CRR) at Boston College, and measures the percentage of working-age households at risk of being unable to maintain their pre-retirement standard of living during retirement. A household is deemed to be at risk if their projected retirement income falls short of the appropriate target.1 The latest NRRI research explores the role of inheritances in retirement preparedness.

The NRRI utilizes data from the Survey of Consumer Finances, which indicates which households received an inheritance and the amounts of those inheritances. To determine their role in retirement preparedness, the values of these inheritances were projected forward to age 65, and the annuity income provided by these amounts was subtracted from the NRRI calculation. This allowed for comparison of NRRI results both with and without the retirement income inheritances are projected to provide.

The research found that, in aggregate, inheritances do not have a significant impact on the NRRI, in part because most households do not receive one. However, at an individual household level, inheritances notably improve retirement preparedness. Further, even if households that receive inheritances are still at risk as measured by the NRRI, these households are in a much improved position.

Past NRRI research has shown that younger households are at greater risk of not achieving a secure retirement as compared to older households. By leaving an inheritance to younger generations, retirement preparedness can be significantly improved. Even a relatively modest amount of wealth left to the next generation can have a meaningful impact, and solutions are available in the marketplace to help accomplish this.

Prudential is the exclusive sponsor of the National Retirement Risk Index.




1 Target replacement rates vary by household type (e.g., married, single earner) and income group (e.g., middle income tercile). A household is not at risk if it is projected to provide at least 90% of a target replacement rate. For example, a household is not at risk if it is projected to replace at least 63% of pre-retirement income when the target replacement rate is 70%.




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