New research from Hewitt Associates found a typical 55-year-old worker who saves 10 percent of his or her income in a 401(k) will need to save an extra 12 percent for the next 10 years to replace savings lost in 2008, or work an extra two years. Even if boomers can get back what they lost in the downturn, they're still expected to fall short of recommended retirement income levels.
"Most Americans were already far from achieving adequate levels of retirement income before the economy collapsed, and for many, the financial downfall has made reaching these goals nearly impossible," explains Rob Reiskytl, Hewitt's leader of Retirement Plan Strategy and Design.
"[T]he key for workers is to keep saving, and to make sure they are using all the tools and resources they have at their disposal to maximize their retirement savings potential. It also means that many employees -- particularly Baby Boomers -- may have to make some tough decisions about what retirement looks like. They may need to work longer, part-time, or find other ways to supplement income in retirement to make up for the shortfall."
Hewitt recommended ways for workers to maximize their retirement plan's earning potential:
- Take advantage of company matches. Roughly 3 percent of employers have suspended company matches. Boomers who still have the option should take advantage of it, and if not, should increase their own contribution to make up for the reduced contribution.
- Set up plans to automatically increase the amount of the contribution. An extra 1 percent per year will hardly be missed, but can add 50 percent or more to retirement savings, according to Hewitt. Over half of employers offer this option.
- Don't get complacent, especially now. Make sure funds are properly diversified and rebalanced occasionally for the right mix of funds.