Most Workers Will Likely Need to Work Longer or Save More to Meet their Financial Needs in Retirement
A new analysis from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc, reveals that most workers will likely be working 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. Exact income replacement depends on the unique situation of each worker including age, income, anticipated retirement age and Social Security.
Aon Hewitt finds most workers are coming up short when it comes to preparing for retirement. Only one-in-five are on track to meet or exceed their needs in retirement at age 65. An additional 20 percent may be close to having reasonably adequate savings with some lifestyle adjustments. This leaves 60 percent 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 percent are not expected to have enough to retire even by age 75.
“The benefits landscape has changed over time and U.S. workers are now accountable for a greater portion of their financial needs in retirement,” said 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.”
Aon Hewitt finds many workers are not planning enough for their long-term financial goals. A separate Aon Hewitt survey found that just over half of workers (54 percent) have estimated their retirement needs, determined savings requirements or forecasted how much income they’ll need in retirement. Only 40 percent of workers have created a financial plan to achieve their retirement goals.
“Many employers are increasing their focus on financial wellness, offering education, tools and resources to help workers achieve their savings goals,” explained Reiskytl. “Taking advantage of online tools such as budgeting and debt management programs and apps, professional investment advice and savings features like target date funds, automatic rebalancing and managed accounts, are all things that will help workers close the savings gap.”
About Guest Author Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services.