Industry News

On January 19, 2021, the Center for Retirement Research (CRR) at Boston College released its report, The National Retirement Risk Index: An Update from the 2019 SCF. As discussed in this report, the National Retirement Risk Index (NRRI) measures the percent of U.S. working households at risk of being unable to maintain their pre-retirement standard of living throughout retirement. Originally, the NRRI was constructed using the Federal Reserve’s 2004 Survey of Consumer Finances (SCF), which provides information regarding   U.S. households’ assets, liabilities, and demographic characteristics on a triennial basis. 

The NRRI compares the projected household replacement rates (i.e., projected household retirement income as a percentage of projected pre-retirement income) with the target replacement rates needed to maintain their living standard. Households are considered to be “at risk” if their projected replacement rates are below the target rates by more than 10%.

The key findings include:

• From 2016 to 2019, the NRRI declined slightly from 50% to 49%;
• The improvement reflected gains in stock and housing prices, which were partially offset by lower interest rates and Social Security replacement rates;
• In 2020, the economy was impacted by COVID and the subsequent recession;
• Due to higher unemployment that was slightly offset by the continued growth in stock and house prices, the NRRI increased to 51%; and
• Generally, 50% of today’s workers remain unprepared for retirement, which indicates the need for universal access to employer-based savings plans.

The report concludes, “This analysis clearly confirms that we need to fix our retirement system so that employer plan coverage is universal. Only with continuous coverage will workers be able to accumulate adequate resources to maintain their standard of living in retirement.”

The issue brief is available here.