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Friday, July 05, 2013

DFA Research Challenges Accepted Wisdom on Savings

News summary by MFWire's editors

Most aspiring retirees and their advisors feel faint when they think on the subject of retirement savings. It's just naturally assumed that they haven't, and won't save enough.

A new study from Dimensional Fund Advisors [profile] is poking holes in that common wisdom, according to Reuters.

Savers usually freak because the general assumption is that their salary replacement rate will have to be 75 to 80 percent -- which for many seems impossible to achieve.

The Dimensional research, penned by Marlena Lee, says that the actual replacement rate needed is much lower. The gist of her argument is this: the more a saver makes, the lower their replacement rate upon retirement needs to be because line items like high working-year taxes disappear in retirement.

The full argument can be read in Reuters

Edited by: Tommy Fernandez

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