OECD’s Misleading Retirement Replacement Income Statistic for the United States

December 23, 2020

National Academy of Social Insurance

December 7, 2020

According to the Organisation for Economic Cooperation and Development’s influential Pensions at a Glance, the United States has a gross retirement income replacement rate for average-income workers of 70.3 percent (see table 5.3). On the face of it, a 70.3 percent replacement rate is impressive. It matches the 70 percent replacement rate that most financial advisors consider to be the goal of retirement planning strategies. That will surprise those who believe there is a growing retirement crisis in this country. Given the prestige of the OECD, it would seem to be prima face evidence that the retirement crisis is a myth.

But is that statistic valid? Will typical workers receive 70.3 percent of their preretirement income when they leave work?

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