Wednesday, July 16, 2008
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 percent to 90 percent 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 released by the consulting company projects that workers will need to replace, on average, 126 percent of their final pay in retirement. The study, based on 1.8 million employees with 401(k) plans that Hewitt administers, says only 19 percent of participants are on track to meet their retirement needs. About 67 percent of workers are expected to have less than 80 percent 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.
Source/more: Indianapolis Star, http://www.indystar.com/apps/pbcs.dll/article?AID=/20080713/BUSINESS/807130330