August 23, 2012
--- Households that defer less than 10% of their salary
for retirement savings are at risk for not meeting their retirement goals,
Putnam Investments’ research found. ---
to Putnam’s Lifetime Income Score, households that defer 0% for retirement are
on track to replace 54% of their income at retirement with Social Security, but
only 16% without it. Households that defer up to 3% are on track to replace 56%
of income with Social Security and 23% without it, and those who defer 3% to
10% can replace 84% of income with Social Security, but 50% without it.
also found that households with access to a defined contribution (DC) plan do
not always participate. Of the 60% of households eligible for DC plans, 8% do
not contribute to a plan. Of that 8%, 3% are not contributing but have a
balance (lapsed contributors); and 5% have never enrolled in a workplace plan.
eligible but never enrolled will rely more heavily on Social Security than the
average household (36% versus 32%) and less on retirement plan savings (16%
numbers underscore the importance of plan sponsors and advisers encouraging
participants to save at an adequate rate to replace income in retirement, especially
with the uncertain future of Social Security. “At the end of the day, the real
driver is, ‘Are you saving enough?’” Ed Murphy, head of defined contribution at
Putnam, told PLANADVISER.