Incorporating Home Equity into a Retirement Income Strategy

2015 ◽  
Author(s):  
Wade D. Pfau
Keyword(s):  
Retirement Income ◽  
Home Equity

scholarly journals HOW ACCURATELY DOES 70% FINAL EMPLOYMENT EARNINGS REPLACEMENT MEASURE RETIREMENT INCOME (IN)ADEQUACY? INTRODUCING THE LIVING STANDARDS REPLACEMENT RATE (LSRR)

2016 ◽  
Vol 46 (3) ◽  
pp. 627-676 ◽  
Author(s):  
Bonnie-Jeanne MacDonald ◽  
Lars Osberg ◽  
Kevin D. Moore
Keyword(s):  
Living Standards ◽  
Living Standard ◽  
Retirement Income ◽  
Home Equity ◽  
Replacement Rate ◽  
Policy Makers ◽  
Income Adequacy ◽  
Rate Measure ◽  
The Right ◽  
Dynamic Population

AbstractWill 70% of a worker's final annual employment earnings sustain living standards after retirement? Despite increasing skepticism, the most dominant measure of retirement income adequacy by financial planners, pensions plan advisors, academics and public policy makers is the “final employment earnings replacement rate”, where 70% is considered the right target to ensure living standards remain at approximately the same level after retirement. Using Statistics Canada's LifePaths dynamic population micro-simulation model, this paper asks whether those individuals from the 1951–1958 Canadian birth cohort who attain roughly a 70% final employment earnings replacement rate (as conventionally measured) at retirement do, in fact, achieve approximate continuity in their living standards. We find that the conventional final earnings replacement rate measure has little predictive value for living standards continuity between working-life and retirement. The primary reason is that employment earnings in a single year is not a reliable representation of a worker's standard of living — it relies on an inadequate pre-retirement measurement period, does not incorporate important components of consumption sources (such as home equity), and ignores household size (particularly children). As a result, we find that the correlation between the conventional earnings replacement rate and actual living standards continuity is relatively low (0.11). The paper therefore suggests an alternative metric for assessing how well a worker's living standard is maintained after retirement — i.e., the Living Standards Replacement Rate, or the LSRR. The LSRR provides a more accurate, understandable and consistent measure of retirement income adequacy.

The Calculus of Retirement Income

2006 ◽  
Author(s):  
Moshe A. Milevsky
Keyword(s):  
Retirement Income

Who's Managing Your Retirement Income?

CFA Magazine ◽  
2008 ◽  
Vol 19 (5) ◽  
pp. 18-19 ◽  
Author(s):  
Jon Stokes
Keyword(s):  
Retirement Income

Home Equity in Retirement

2011 ◽  
Author(s):  
Makoto Nakajima ◽  
Irina Telyukova
Keyword(s):  
Home Equity

Retirement Income Strategy & Policy: Where To From Here?

2011 ◽  
Author(s):  
Jeremy Cooper
Keyword(s):  
Retirement Income

Home Equity Lines of Credit and the Unemployment Rate – What Does the Evidence Say?

2012 ◽  
Author(s):  
John Phillip Lajaunie ◽  
Norbert J. Michel ◽  
Shari Lawrence ◽  
Ronnie Fanguy
Keyword(s):  
Unemployment Rate ◽  
Home Equity ◽  
Lines Of Credit

Portfolio Choice in Retirement - What is the Optimal Home Equity Release Product?

2013 ◽  
Author(s):  
Katja Hanewald ◽  
Thomas Post ◽  
Michael Sherris
Keyword(s):  
Portfolio Choice ◽  
Home Equity ◽  
Release Product
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