Retirement as a Multi-Layered Pyramid

ICI report sees retirement as much more sturdy than others typically do.

According to new research from the Investment Company Institute, there is reason for great optimism about the health of the American retirement system, much in contrast to less sanguine predictions. The conventional wisdom views the retirement system as a three-legged stool. The ICI believes that this is too narrow and it broadens the scope to include two additional layers. The ICI posits that the better approach is to view retirement as a five-layer pyramid. According to the ICI, the retirement system has provided individuals with adequate resources, and successive generations of retirees have been better off than their predecessors. 


Among the key findings in the ICI report, The Success of the U.S. Retirement System:

• most households maintain their standard of living in retirement,
• recent retirees generally have greater resources to draw on in retirement than did previous generations,
• adjusting for inflation and the number of American households, assets designated for retirement are about three times larger as of mid-year 2012 as compared to 1985,
• poverty among the 65+ population has dropped from about 30% in the mid-1960s to 9% today.

The composition of the pyramid will vary from one household to another, but the key difference when compared to the traditional three-legged stool is that the ICI model factors in housing resources and a broad "other assets" category. Here is an example from the ICI report of the emphasis it places on homeownership: 
"Homeownership is like having an annuity that provides rent, as the home provides a place to live that otherwise would have to be rented."
 
The ICI perspective is very interesting. It would appear to go far to explain how earlier generations survived in retirement even with relatively modest resources. The full ICI report, The Success of the U.S. Retirement System, is available on its website.

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