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Should you use the replacement ratio or withdrawal rates?
Experts say Americans need on average 70 percent of their pre-retirement income to live comfortably after exiting the workforce. Currently, for workers who retire at 62 have a median replacement ratio of about 55 percent but that figure is expected to drop seven percentage points to 48 percent because of the pandemic-fueled recession. A replacement ratio is how much pre-retirement income a person needs to maintain their standard of living in retirement and is a useful tool for people planning their retirement while in their 20s through 50s, but it is less useful the closer a person is to retirement. So, what should individuals closer to retirement use instead of replacement ratio? To find out click here…
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