Status on America's retirement
But savings tend to be modest.
Consider: Financial experts recommend individuals
replace at least 70 percent of their pre-retirement
income in retirement. Others set the bar higher.
When EBRI polled retirees, 55 percent said
they need income that's equal to 95 percent
of their pre-retirement income -- or more.
Nevertheless, EBRI found that,
on average, 49 percent of workers have saved
less than $25,000. Among older individuals
who are 55 or older and poised to quit working
soon, one-third has less than $25,000. A slim
minority -- 14 percent of people of all ages
-- have more than $250,000. Among those 55
or older, 29 percent have saved that much
The upshot? The Center for Retirement
Research at Boston College concludes that
more than four of 10 Americans are "at
risk" for being unable to maintain their
standard of living in retirement.
Fidelity Research Institute computes that American households have a median $22,500 in retirement savings and should receive $29,500 in Social Security. That puts them on track to replace 58 percent of their pre-retirement income after work.
That means "the typical
household will have to live on 42 percent
less income in retirement when compared to
their pre-retirement income," says Guy
Patton, executive director at Fidelity's retirement
research group. "The thing that worries
many of us is that it doesn't allow room for
Missteps among good moves
The typical 401(k) plan requires individuals to save at least 6 percent of earnings to qualify for a full match of funds from employers. Most employees surpass this benchmark, setting aside 7.9 percent of their salary. Add the typical employer match of 3 percent, according to Profit Sharing/401K Council of America (PSCA), and workers are setting aside a bit more than 10 percent of earnings.
Yet, 22 percent of those who
contribute to a 401(k) fail to
save enough to qualify for a full match from
their employers, Hewitt found. And nearly
half of low-wage workers and 37 percent of
employees in their 20s left this free money
on the table.
Ironically, the growth in automatic
enrollment could be partly to blame. It's
currently offered in nearly 17 percent of
plans, according to ICI. And roughly seven
of 10 workers favor automatic enrollment into 401(k)s because it ensures people
get signed onto saving, EBRI found. Conversely,
the so-called "default" savings
rates -- which now average 3 percent, according
to PSCA -- can be set below the typical 6
percent threshold to qualify for matching