How much do your 401(k) plan participants need to accumulate in their accounts in order to retire without making significant lifestyle adjustments? Here are some estimates from a variety of sources:

  • 8x final pay at age 67 - Fidelity
  • 8x final pay - USA Today
  • 9.4x final pay at age 67 - Aon Hewitt
  • 10x final pay - Frontline Special on PBS
  • 11x final pay at age 65 - Aon Hewitt
  • 12x final pay - T. Rowe Price
  • 13.5 final pay at age 63 - Aon Hewitt
  • 18x final pay - EBRI
  • 20 to 25x final pay at age 65 - many financial advisers
  • 25x final pay - to ensure an annual withdrawal rate of 4%

With such a wide range of opinions, it can be hard for participants to know what to aim for. Consider discussing the following factors during your employee education sessions to help them determine their appropriate target:

1. Lifestyle. The amount an individual needs in retirement is highly dependent upon the lifestyle that he/she intends to lead. It has become common to retire and not adjust standards of living. This expectation results in a higher final balance target. 

2. Health and health care. Those employees who struggle with health issues now will likely struggle to an even greater extent in retirement. If health care expenses are expected to be high, a higher final balance should be targeted.

3. Longevity. Does long life run in the family? If so, suggest targeting a higher final balance.

4. Long-term care. Coupled with longevity is concern about the need for long-term care. Even if nursing home care is not necessary, assisted living or in-home care expenses will likely be incurred by all of us. If this is a concern, participants should target a higher balance.

5. Lack of family. Some individuals never had children and some may have moved away from their families and lost touch. If an individual can expect to be all by himself/herself, targeting a higher balance is probably wise.

How are most participants doing? Recent studies have found that 50% of workers are not on track to save enough to retire without reducing their standard of living. A study by Vanguard published in Time magazine indicates that workers should save at least 12% to 15% of their income each year. It is likely that most of your participants are not saving anything near this amount.

Communicate these facts in your next employee education session so that your participants can make adjustments as soon as possible. 

Robert C. Lawton is president of Lawton Retirement Plan Consultants, LLC (, an RIA firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities. He may be contacted at or 414.828.4015.

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