Many economists and policy-makers have expressed concern that
households do not save enough to maintain an adequate standard
of living during retirement. There is no consensus however, on
what this standard should be or what level of saving is
necessary to achieve it. In the literature, the optimum level
falls somewhere between two standards of ‘adequacy’. The first
is a widely accepted standard — having available retirement
income of between about two thirds of pre-retirement earnings
(regarded as the level necessary to maintain consumption levels
prior to retirement). The second involves having retirement
income equal to or greater than poverty or near poverty levels
of income (Binswanger & Schunk 2009). The question of what
represents an adequate standard of living during retirement
basically relates to a trade-off between spending during working
life and spending during old age (Scholz & Seshadri 2008). One
study, carried out in the US and the Netherlands, looked at the
minimum level of retirement spendin