The changing landscape of retirement rules of thumb

Author:Naomi E. Boyd, Davide P. Cervone, Presha E. Neidermeyer, Adolph Neidermeyer
Position:Department of Finance, West Virginia University, Morgantown, West Virginia, USA; Department of Mathematics, Union College, Schenectady, New York, USA; Accounting Department, West Virginia University, Morgantown, West Virginia, USA; Accounting Department, West Virginia University, Morgantown, West Virginia, USA
Pages:106-114
SUMMARY

Purpose - The purpose of this paper is to evaluate the continued adherence to “standing” rules of thumb for the percentage of pre-retirement income which should be available to retirees. Design/methodology/approach - An analysis of census data to determine both the cause and magnitude of the debt load which retirees are carrying into... (see full summary)

 
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The changing landscape of
retirement rules of thumb
Naomi E. Boyd
Department of Finance, West Virginia University, Morgantown,
West Virginia, USA
Davide P. Cervone
Department of Mathematics, Union College, Schenectady, New York, USA, and
Presha E. Neidermeyer and Adolph Neidermeyer
Accounting Department, West Virginia University, Morgantown,
West Virginia, USA
Abstract
Purpose – The purpose of this paper is to evaluate the continued adherence to “standing” rules of
thumb for the percentage of pre-retirement income which should be available to retirees.
Design/methodology/approach – An analysis of census data to determine both the cause and
magnitude of the debt load which retirees are carrying into their post-working years.
Findings – The “standing” rules of thumb appear to provide less than adequate levels of income for
retirees to service their continuing debt load which they have chosen to carry into their retirement years.
Research limitations/implications Census data are subject to the accuracy of “captured
information” provided by the surveyed individuals. In this case, the information captured is consistent
with generally reported data on the sufciency of retirement income.
Practical implications – Financial planners need to “get the word out early” that individuals need to
consider earlier/greater funding of their anticipated retirement income.
Social implications – Rising retirees may be “precluded” from retiring as anticipated because of the
insufciency of the replacement income they will have during their retirement years.
Originality/value – Detailed census data have not been reviewed in detail with a focus on “individual
debt load” as we have performed in this research study.
Keywords Adequate retirement income, Consumer debt, Retirement debt, Retirement planning,
Mortgages in retirement
Paper type Viewpoint
1. Introduction
Low interest rates by traditional standards have sparked consumers’ interest in
mortgage renancing. Financial institutions have countered this renancing
interest, given current economic conditions, by imposing more stringent lending
standards. The interface of these two occurrences has been that large numbers of
consumers have been unable to successfully renance to reduce their mortgage
payments and/or shorten the period of their mortgage obligations. As a result,
consumers have been carrying continuing/increasing mortgages into their later
years. With this nancial obligation in mind, the simple rules of thumb for
determining the appropriate levels of retirement income to sustain consumers’
standards of living are becoming increasingly outdated.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
JFRC
23,2
106
Journalof Financial Regulation
andCompliance
Vol.23 No. 2, 2015
pp.106-114
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-04-2014-0020

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