May 21, 2018

How Much Should You Save for Retirement?

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How Much Should You Save for Retirement?

Are you saving enough of your salary to cover your retirement years? A new study finds that you should have 11 times your final working salary stowed away by age 65 for your retirement years. That total reflects beyond Social Security payments that you might expect too. 

If you plan to postpone your retirement to age 67, you’ll need 9.4 times your pay, according to the consultant firm Aon Hewitt’s “Real Deal” study, which analyzed the retirement needs for 2.2 million employees at 78 large companies. 

If you plan to retire early and move up your retirement to age 62, you’ll need 13.5 times your salary, according to the report. 

Aon Hewitt says its estimates account for inflation, estimated medical costs in retirement, and retirees who want to maintain their preretirement living standards throughout an average life expectancy (which is 87 for males and age 88 for females). 

Researchers found that, on average, employees expect to have 8.8 times their pay for retirement, leaving a 2.2 percent shortfall from Aon Hewitt’s estimates of what they’ll truly need. 

“The study indicates employees who save for retirement over long periods of time and who invest appropriately can accumulate benefits that are reasonably close to what they might need to maintain their preretirement standard of living during retirement,” the study notes. “However, the study also indicates that approximately 70 percent of full-career contributing employees are not on track to retire with adequate financial resources.” 

Source: “The Real Deal: 2012 Retirement Income Adequacy at Large Companies,” Aon Hewitt (2012)