Here’s to hoping most older workers really, really like their jobs!
American employees who are counting on maintaining their current lifestyle post-work may be in for a rude awakening.
A staggering two in three 401k participants’ funds will fall short of the amount required for a desirable retirement if current savings trends continue.
The findings were revealed in The Real Deal: 2018 Retirement Income Inadequacy, a report released by Aon.
Instead of retiring at 67, half of employees would need to work until age 70 to make up for their nest egg’s shortcomings.
Aon recommends participants save around 11 times their final pay in order to avoid this scenario. Unfortunately, it’s much more common for workers to defer 4 to 7 percent.
“On average, employees should have 16 percent of pay going into their retirement accounts every year to accumulate about 11 times pay by age 67. If an employee is receiving 6 percent from their employer, that means they would be responsible for the remaining 10 percent. Employees who save even more may increase their ability to retire early,” the global professional services firm noted in its report.
By comparison, participants in defined benefit plans are doing much better. Two-thirds are on a path toward retiring on time, as well as half of workers who are over age 50.
“Retirement readiness is ultimately about each individual’s goals and resources, and every person’s adequacy calculations are unique,” Rob Reiskytl, a partner at Aon, said in a statement. “Providing information about how much one should save to reach their retirement goal can be a concrete way to set up employees for financial success in retirement. It is also important to remember the broader financial wellbeing picture and that there may be legitimate reasons why employees at certain ages aren’t saving ‘enough.’”
“Employers have a big opportunity to help their employees determine the best savings plan, providing them with tools like financial wellbeing programs and budgeting systems, and educating them on being financially-savvy can all help close the retirement readiness gap,” he added.