Download “Retirement Health Care Costs and Income Replacement Ratios”
RETIREMENT HEALTH CARE COSTS AND INCOME REPLACEMENT RATIOS
Financial advisors, plan sponsors, and millions of investors rely on income replacement ratios (IRRs) – a percentage of pre-retirement income – to estimate how much will be needed to maintain desired lifestyles in retirement. IRRs have provided advisors with a streamlined, top-down approach for assessing a client’s retirement readiness without having to calculate and project individual line-item expenses: a bottom-up strategy that is more comprehensive, but also time-consuming. A key assumption underpinning the use of IRRs is that pre-retirement income is a good basis for calculating income needs in retirement. Unfortunately, when it comes to health care this is not the case.