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CRR Examines the National Retirement Risk Index with Varying Claiming Ages

On November 7, 2023, the Center for Retirement Research (CRR) at Boston College released its issue brief, The National Retirement Risk Index with Varying Claiming Ages. As discussed in the brief, 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. This brief is intended to examine the relationship between Social Security claiming ages and the inclusion of earnings as well as the extent to which assuming more realistic claiming ages reduces the “excluded earnings” factor after the assumed retirement age of 65.

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. The NRRI assumes all households claim Social Security and retire at 65 and does not include earnings after age 65. Generally, the NRRI confirms the earlier findings that 50% of households are unprepared for retirement and will not be able to maintain their pre-retirement standard of living. 

Other key findings include:

  • Overall, households ages 62-75 have substantial earnings.
  • About 50% of all earnings for those ages 62-75 are excluded from the NRRI and may distort the results.
  • Introducing more realistic claiming ages for low-, middle-, and high-income households would: 1) increase the earnings in the NRRI to two-thirds, with the remainder being allocated mainly to high earners where it has little impact; and 2) produce a more reasonable pattern of percentage “at risk” by income group. 

The brief concludes, “while the existing NRRI produces a good representation of risk for the whole population, an index that varies Social Security claiming ages includes the bulk of earnings by older workers and provides a better picture of outcomes by income group. So those parameters will be used to construct the NRRI going forward.”

The brief is available here.