But none of these savings or tax requirements exist postretirement. As a result, even with very different post-retirement income levels retirees may still be able to afford the consumption expenses needed to maintain their level of preretirement well-being.
The study of consumption or expenditure patterns provides a better sense of retirees’ well-being than arbitrary estimates such as “replacement ratios.” And if income, expenditures, and wealth-holding patterns can be studied together, this can provide a more complete idea of how people are doing in terms of being able to afford retirement.
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