Georgia State University & Aon Consulting
Update RETIRE Project  

The sixth iteration of the RETIRE Project—2004 GSU/Aon RETIRE Project Report—was released in April by the Center for Risk Management and Insurance Research at Georgia State University. The goal of this ongoing research project—led by Bruce A. Palmer, Director of RMI Executive Education, and funded by Aon Consulting—is to help individuals and couples determine the amount of money they must save at retirement in order to maintain their pre-retirement standard of living throughout the post-retirement period. In addressing the issue, the RETIRE Project calculates a series of income replacement ratios at eight pre-retirement salary levels ranging from $20,000 to $90,000. The calculations include factors such as Social Security taxes; federal, state and local income taxes; pre-retirement savings; and selected expenditure changes.

In comparison with the 2001 RETIRE Project, the 2004 findings suggest an increase in the amount workers must save to maintain their standard of living after retirement, especially for low-income workers, with a “flattening-out” for middle-income workers. For example, the gross retirement replacement ratios for the 2004 study's baseline scenario (i.e., married couple with an age 65 wage-earner and an age 62 non-wage-earning spouse) start at a high 86% at a pre-retirement salary of $20,000, successively decrease to a low of 75% at $60,000, and then begin to increase topping out at 78% at $90,000. The 2001 study found gross pre-retirement replacement ratios of 83%, 75%, and 76%, respectively. Despite the differences in magnitude, this modified “u-shaped pattern” has been observed in all but one of the previous RETIRE Project studies. Palmer suggests that the variation in the retirement income replacement ratios observed across studies can be explained by changes in federal income tax laws as well as changes in consumer savings and expenditure behavior. He explains that stability in the ratios is preferable because it helps in the retirement planning process. The 2004 RETIRE Report explores retirement income replacement ratios for other consumer unit configurations, including single workers and two-wage earner couples.

For additional information or to purchase the full 2004 GSU/Aon RETIRE Project Report, visit the Center for Risk Management and Insurance Research's web site at http://rmictr.gsu.edu. You may also contact the Center's Shannon Mosher at 404.651.4250 or by email at smosher@gsu.edu. Alternately, you may download and complete an order form by clicking here.