The analysis, “Retirement Security: Helping Workers Set Realistic Savings Goals,” examines workers’ income, consumption and savings patterns over their lifetime, revealing “undue overestimates of earnings to be replaced in retirement and misperceptions about workers’ own responsibility for securing their retirement prospects.” The authors of the analysis, Gaobo Pang and Sylvester J. Schieber, believe American workers are “generally better equipped for retirement than depicted in some studies.”

Pang and Schieber say recent assessments of workers’ retirement readiness are inaccurate because they do not recognize the fact that workers’ patterns of income, consumption and savings are not consistent throughout their careers.

One problem, says Pang and Schieber, is that such assessments ignore the fact that workers can catch up saving after children leave home and the mortgage is paid off. The authors note that “most retirement income models do not account for the presence of children in the household [at all].” The authors say that a number of studies show while consumption rates are greater for these parents/workers when they have children living at home, once the children grow up and leave the home, the consumption levels of the parents/workers tend to decrease. The analysis also notes that ages of the children can affect the savings rates and accumulated savings of their parents.

The analysis notes home equity can also be overlooked in assessments about workers’ retirement readiness. The authors cite data that shows among households headed by those ages 65 to 74, 60% owned a house that was mortgage free. With one less expense to worry about, such workers do not need to save as much for retirement.

Pang and Schieber also observe that many measures of pre-retirement income and consumption are overstated due to inappropriate indexing, leading to overestimates of earnings replacement targets and underestimates of the income replacement capacity of Social Security. According to their calculations, “medium earners would not need eight or 11 years’ worth of earnings to replace 65%, 75% or even 85% of their pre-retirement income by most measures.” Instead, a worker would need about six years’ worth of earnings to meet the 75% target and four years for 65%.

“Many workers who saved eight times earnings would have significantly higher spendable income in retirement than they did while working,” say the authors. “Social Security would enable very low earners to maintain their pre-retirement income levels without any supplemental savings.”

The analysis concludes that although some workers need to improve their retirement readiness, the situation is less dire than many studies suggest. The authors of the survey recommend that standards of how much workers will need as they approach retirement will need to be improved, as will models of retirement savings behavior and existing savings programs, in order to more accurately determine how many workers are really retirement ready and how to help those that are not.

The Towers Watson report is here.