Americans are on track to replace 61% of their current
income in retirement, according to the third annual Lifetime Income Survey by
“We were sort of surprised it was as high as it was,” Van
Harlow, director of investment retirement solutions at Putnam Investments, told
PLANADVISER. In an ideal world, he added, the number would be about 75%.
Social Security also plays a large role in the income
replacement projection, which would fall to 22% without it. “Social Security is
a critical underpinning in most Americans achieving retirement security, retirement
preparedness,” said Ed Murphy, head of defined contribution at Putnam
In addition to Social Security, the Putnam Lifetime Income
Score (LIS) survey takes into account a variety of financial factors including defined
benefit and defined contribution assets, personal savings, home equity,
business value and potential inheritance. This year’s survey, for the first
time, also incorporated mortality rates associated with a variety of common
Those best positioned for retirement success share three
characteristics, according to the LIS research report: having access to
workplace savings plans, working with a financial adviser and deferring 10% or more of their income.
Access to Workplace Retirement
Workers who are eligible for a workplace retirement plan are on track
to replace 73% of their income versus 41% for those who do not have such access,
according to the LIS survey. Active participants in a 401(k) plan are currently
on track to replace 79%.
Workers in the educational services industry are likeliest to be
eligible for a workplace plan (82%), and are collectively on track to replace
72% of current income, while those in the leisure and hospitality industry—the
least likely to have access to workplace savings (54%)—are only on track to
achieve 55% replacement.