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A gauge by which to measure your assets

By Barbara Whelehan · Bankrate.com
Friday, July 9, 2010
Posted: 2 pm ET

Most people check their blood pressure on occasion to make sure it falls within normal ranges. But how often do we do a retirement readiness checkup to determine if we'll have enough retirement income someday? Retirement-asset needs will vary dramatically, of course, depending on individual household needs, but it's helpful to have some sort of gauge.

A recent study by Hewitt Associates puts the number at 11 times your annual pay. That's how much you need to have piled up in retirement resources. That doesn't include Social Security, of course, which moves that gauge up to 15.7 times pay.

The study actually analyzes the retirement readiness of 2.1 million employees at 84 large companies. Its big conclusion: Those who contribute to their retirement plans over a 30-year career are on track to have resources amounting to 13.3 times their pay, including Social Security. So on average, they are 15 percent short of that 15.7 multiple.

Do you know many people who worked for the same company for 30 years or more? I can name two: my husband and my dad.

Not surprisingly, employees who are blessed with both old-fashioned pension plans and 401(k)-type accounts are in the sweetest position, with a shortfall of just 1.4 times pay compared to those with 401(k) plans only, who are short 4.3 times pay.

Bankrate offers a shortfall calculator that you may find helpful or disturbing.

What you can do

If you find you're coming up short on that gauge, relax. You have some tools at your disposal to brighten your golden years. Among them: Increase your savings, don't tap your retirement assets early and take charge of your investments. Of course, working longer would also help a lot for several reasons.

What about those people who work for small companies that don't offer any type of retirement plan? The study doesn't address this major part of the work force. But workers in these cases do need to be proactive by contributing to a traditional or Roth IRA at the very least.

Self-employed workers have several other retirement plan options available to them as well.

But if you do happen to work for a big company, that's no guarantee that you're in good shape. Just 18 percent of workers in the study will have all the money they need, while 19 percent will fall short by more than five times pay when they retire. Overall, employees in the study are on track to have 68 percent of their retirement needs met.

Those who work for a big company and don't contribute toward a plan at all will have only 43 percent of their needs met.

What do you think? Is 11 times pay an achievable goal?

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