Future entitlement reforms will likely increase the importance of many workers’ personal savings for retirement. And as the Government Accountability Office (GAO) indicates in a new report, workers deciding how much to save should carefully consider their probable “replacement rates” — how much of their current incomes they will likely need in retirement.
GAO says that target replacement rates in various articles and reports “typically range between 70 and 85 percent of pre-retirement income.”
But the agency says its analysis of literature on the subject “found that calculating an appropriate replacement rate can be complex” because of varying individual circumstances and experts’ differing views on certain issues.
GAO found that the information and tools the Labor Department provides on this subject “may be too limited” to sufficiently assist workers.
The new report recommends that the Labor Department provide additional examples and guidance to the public while modifying its planning tools. The department generally agreed with the recommendations.
Better Information on Income Replacement Rates Needed to Help Workers Plan for Retirement (GAO)
How Much Retirement Income Do You Really Need? (CBS)