Are Your Retirement Savings on Target?
US News & World Report, July 1st, 2008
Employees aren't sure how much of their salary they should replace in
retirement. As part of an online test on retirement income, MetLife
Mature Market Institute and GfK North America asked, "What percent of
preretirement income do experts think retirees need to use as a
benchmark for determining the amount of annual income needed in
retirement?" The chart below shows the responses of workers between the
ages of 56 and 65 who plan to retire in the next five years.
They're right to be confused. There is no correct income replacement
rate for everyone. An adequate level of income depends on retirement
expenditures, retirement age, gender, asset allocation, and the
percentage of savings that is annuitized, according to the Employee
Benefit Research Institute.
Some economists doubt altogether the validity of the replacement
rate calculations that many online calculators provide, saying that
they often ignore variables that are impossible to predict, such as longevity, investment returns, and catastrophic healthcare costs that can derail all but the most sound retirement plans.
Human resources consulting firm Hewitt Associates released a report
today saying that employees will need to replace, on average, an
astonishing 126 percent of their final pay in retirement after
inflation and medical costs are factored in. Most workers are on target
to replace 85 percent of their income based on Hewitt's analysis of
nearly 2 million employees at 72 large U.S. companies.
Read more of this article.
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