I would bet that very few individuals, even the most savy, know how much they "should" save to reach their retirment goals, or know what their expected retirement income is. The recent edition of The Economist provides a great rule of thumb we should relay to our students.
That approach will be hopelessly inadequate for those who want to build a decent pension, especially in defined-contribution, or money-purchase, schemes, where the employee bears all the investment risk. The average American scheme member contributes just 7.8% of salary to his pension scheme. His employer, on average, contributes only 4.4%. He has a pot worth only $68,000. A rule of thumb is that total contributions need to be around 20% of wages to match a traditional final-salary scheme.
The Economist, 12/6/08, page 13
- ► 2009 (71)
- I told you the money supply doubled!
- The Money Supply Has Doubled!
- Thoughts on Austrian Economics
- Michael Pollan Stars in Atlas Shrugged
- Unintended Consequences
- Saving for Retirement
- Put your money under the mattress
- Wealth of Nations: Part 1
- Can Obama Create Jobs?
- Understanding Exchange Rates
- Worst Intro Ever
- Best Economic Quote Ever
- I have this friend, who...
- New Era of Ag Econ
- Finance and the Macro
- We are finally saving more money
- The Importance of California for Animal Rights Mov...
- Pilgrim Socialism
- I Hate Aggregate Supply / Demand
- Blog Medley
- What OK College Kids Listen To
- Making Fun of Students
- Smoke'em if you got'em
- Blogs are awesome, and prestigious
- Unemployment During the Great Depression
- ▼ December (25)