An analysis from Aon Hewitt reveals that most workers will likely need to work longer to save enough to maintain their standard of living in retirement.
Aon Hewitt’s analysis of 77 large U.S. employers, representing 2.1 million employees, projects the average worker will need to save 11 times their final pay at retirement (age 65) to keep their preretirement lifestyle. However, most workers are coming up short.
Only one in five are on track to meet or exceed their needs in retirement at age 65. An additional 20% may be close to having reasonably adequate savings with some lifestyle adjustments. This leaves 60% of workers unable to afford to retire at age 65.
Aon Hewitt projects that age 68 is the median age U.S. workers will be able to retire with sound financial security, while 16% are not expected to have enough to retire even by age 75. Aon Hewitt notes that exact income replacement depends on the unique situation of each worker including age, income, anticipated retirement age and Social Security.
“The benefits landscape has changed over time and U.S. workers are now accountable for a greater portion of their financial needs in retirement,” says Rob Reiskytl, partner at Aon Hewitt. “Unfortunately, most are under-prepared. The most important thing they can do is to establish goals for the kind of retirement they want and determine a savings plan to meet those needs and desires. This might mean starting to save more now, delaying retirement by a few years, or making a conscious choice to retire with a lower living standard.”
A separate Aon Hewitt survey found that just more than half of workers (54%) have estimated their retirement needs, determined savings requirements or forecasted how much income they’ll need in retirement. Only 40% of workers have created a financial plan to achieve their retirement goals.
Highlights of Aon Hewitt’s sixth installment of The Real Deal Study can be downloaded from here.