Frugality trumps Earnings and Investments in Retirement Preparation
A recent paper looked at how earnings (e.g., salary level), investment acumen, or propensity to save contributed toward retirement readiness.
The abstract states:
“very little of this dispersion can be explained by chance differences in individual circumstances largely outside the control of individuals’….investment choice is not a major determinant of the dispersion in asset accumulation…conclude that the bulk of the dispersion must be attributed to differences to in the amount that households choose to save”
In other words, no matter your earning potential or investment acumen, the strongest predictor of retirement preparation (monetarily speaking) is a person’s propensity to save. Left unexamined is how easily people can change their propensity to save.
This entry was posted by David on May 25, 2007 at 8:06 pm, and is filed under Retirement. Follow any responses to this post through RSS 2.0.Responses are currently closed, but you can trackback from your own site.