I recently came across this Aon Hewitt “Real Deal” retirement income study. The study aims to ascertain how a pool of corporate retirement savers is tracking toward their retirement savings goals by participating in their employer sponsored retirement plans. Here are a few highlights:
- Employees need to replace 85% of their pre-retirement earnings in order to maintain their standard of living during retirement (These are the numbers found in this study. Other studies have shown a range from 65% to 85%).
- Investment advice helps. Citing another study, the report concludes that, “employees who take advantage of investment help can increase returns by as much as 2%-3%” and that “a 1% difference in future return on assets can increase retirement resources by 2 times pay.”
- Postponing retirement two years, from 65 to 67, made a significant difference in the ability of some employees to accumulate adequate retirement savings.
- Employees need to save more and at consistent levels in order to obtain retirement security. The study maintains that “Increasing the savings rate by just 1% of pay each of the next 5 years, and then maintaining that higher savings rate until retirement, will allow the average employee to retire at age 65.”