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According to the National Retirement Risk Index (NRRI), over half of today’s working families are not saving enough to maintain their pre-retirement standard of living. The NRRI is based upon target replacement rates which assume a household’s goal is to accumulate enough wealth pre-retirement to maintain the same standard of living during retirement. Because lower-income families spend a higher portion of their income on basic needs, target replacement rates vary depending on the income group. Low income households have a target replacement rate of 80 percent of income, middle income households 71 percent, and high income households 67 percent.

Households should plan to receive a quarter to half of their retirement income from a savings plan such as a 401k, depending on their total income. In order to meet their target replacement rate, a typical middle income household needs to save around 15 percent of earnings on an annual basis. Overall, younger households need to start saving more and older households need to consider retiring later in order to make up for a shortfall in retirement savings.