Target income-replacement ratios should be higher
than the 70% to 75% conventionally accepted as a rule of thumb, the
Retirement Advisor Council contends.
Reported byTara Cantore
In a position paper, the council says the higher ratio is to account for the projected cost of health care in retirement, plus traditional financial planning concerns such as personal health, children’s educational needs and the cost of caring for elderly relatives. Regardless of target income ratio, the paper calls for consistent contribution levels to 401(k) and 403(b) plans in the range of 10% to 16% of pay over a 30- or 40-year career.