Typical U.S. employees will need to have resources equal to more than 15 times their final pay to maintain their standard of living after they retire, according to analysts at Hewitt Associates Inc.
About 80% of workers may fall short of meeting all their financial needs in retirement, says Hewitt Associates, Lincolnshire, Ill. (NYSE:HEW).
The figures come from a Hewitt study of projected retirement savings totals of about 2 million employees at 84 large U.S. companies.
After factoring in inflation and post-retirement medical costs, the analysts estimate that the employees will need 15.7 times final pay in retirement resources to meet financial needs in retirement.
Of that amount, Social Security is expected to provide 4.7 times final pay, the analysts estimate. The remaining 11 times final pay will need to come from other sources, such as company-provided plans and personal savings, the analysts write.
- Only 18% of employees who contribute to a defined contribution plan and work a full career are expected to achieve the 15.7 times final pay goal. “On average, these employees are on track to accumulate 13.3 times their final pay (including Social Security), leaving a shortfall of 2.4 times pay,” the researchers say.
- 19% of employees are expected to have a shortfall of 5 times final pay or more at retirement.
- On average, workers who rely solely on a defined contribution plan to fund retirement are projected to meet only 74% of their needs in retirement. Employees who are covered by an active or frozen defined benefit plan may be able to meet 91% of retirement needs.