The Link between the Stock Market and Retirement Income

Abstract

This paper analyzes the effect of wealth fluctuations on retirement income adequacy between 1992 and 2000. In addition, the paper estimates how financial wealth relative to income may develop in the medium to long-term. If a fixed real level of consumption is considered for retirement income adequacy, the average household was more likely to be inadequately prepared for retirement, even after wealth increased dramatically in the late 1990s. Moreover, on average, households can expect to reach their peak wealth to income levels only after a period of 30–50 years. To address the likely shortfalls in retirement income adequacy for many households, public policy choices that could help to raise private savings should be considered.