Excerpted from “Goal for Retirement Saving Rises,” by Christine Dugas for USA TODAY:
With medical care and other costs soaring, the portion of their pre-retirement pay that Americans will need in retirement to keep the same standard of living is rising, financial planners say.
For years, a common projection was that workers needed to replace 70% to 90% of their pre-retirement pay to maintain the same living standard in retirement. But now, as medical costs grow, life spans lengthen and fewer retirees receive pensions, financial planners say you’ll need more.
Hewitt Associates is more pessimistic than most. New research that the consulting firm plans to release Tuesday projects that workers will need to replace, on average, 126% of their final pay in retirement. The study, based on 1.8 million employees with 401(k) plans that Hewitt administers, says only 19% of participants are on track to meet their retirement needs. About 67% of workers are expected to have less than 80% of their projected needs.
Sheryl Garrett, founder of the Garrett Planning Network, agrees that typical retirement replacement guidelines “just don’t go far enough when you factor in the huge health care responsibility that is shifting from the employer’s shoulders to ours at retirement.”
“Almost everybody needs to be saving much more for retirement,” Garrett says.