Data and Research

Retirement Readiness Not Just About Money

Assets held at retirement are not the only indicator of retirement readiness, according to researchers at the University of Connecticut.

By Jill Cornfield | February 20, 2015
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Four noneconomic factors—health, job satisfaction, financial planning, and adaptability—are used to predict financial readiness in a new retirement readiness index that fundamentally differs from traditional predictors.

Jay Vadiveloo, professor of mathematics and director of the Goldenson Center for Actuarial Research at the University of Connecticut, set out to measure several factors that affect one’s preparedness for retirement, in an attempt to provide “a more holistic measure.” The standard way of measuring individuals’ ability to retire compares their current net assets with the projected value of those assets at some point in the future. The problem, according to Vadiveloo, is that those projections are hugely dependent on the performance of financial markets.

 “These retirement indices are directly correlated with the current state of the economy and tend to portray a negative image of retirement readiness during adverse economic times, which could be misleading,” he says.

The new National Retirement Sustainability Index (NRSI) adds four factors to the basic model of readiness—health at retirement, job satisfaction, level of financial planning and level of adaptability. These give a more complete picture of what a person’s retirement is apt to look like, Vadiveloo says in the report, and they broaden the list of options people may use to improve their retirement outlook, even during an economic downturn.