Which of these is the most eye-popping statement?
1. There is hostile, intelligent alien life on other planets that may try to conquer and colonize Earth.
2. The average U.S. employee will need to have saved more than 15 times their final pay to maintain their current standard of living during retirement.
Evil aliens, or 15 times final pay?
If you picked the aliens, you must be working in the retirement planning industry. Because I sincerely doubt the average full-time worker (who makes just under $40,000 a year, according to the Census Bureau) genuinely believes they need that much money to secure a comfy retirement. Of course, that’s if they have any clue at all how much they need.
However, my question isn’t to debate the existence of extraterrestrial life or rehash Americans’ woeful savings rates. It’s to remind you that you have a vitally important communication job to do, and the 15 times data — revealed last week, courtesy of Hewitt Associates — give you enough shock-to-the-system ammo to get employees’ attention.
According to Hewitt, when factoring in inflation and postretirement medical costs, employees will need 15.7 times their final pay to meet their financial needs in retirement. Of that, Social Security is expected to provide 4.7 times final pay, leaving employees to pick up the remaining 11 times.
Yet, according to the Employee Benefit Research Institute, 29% think they need to save less than $250,000 for a comfortable retirement. Which would be dandy … for an employee whose final pay is about $22,000. (That sound you hear is financial planners banging their heads against a wall.)
However, the ray of light is this: Workers who have performed a retirement needs calculation are more than three times as likely as those who have not (28% vs. 8%) to expect they will need to accumulate at least $1 million before retiring, EBRI finds.
And while Hewitt’s Rob Reiskytl is right that "Ultimately, [employees are] in control of most of the elements that will help determine their retirement outcomes," you can help employees understand how to better exert that control.
So, get out those trusty 401(k) education PowerPoint slides, e-mails and newsletters, and set up those lunch & learns. I know you may feel like a Smurf from saying the same things so many times, but your employees — especially that 55% that according to EBRI hasn’t done a retirement needs calculation — need to be reminded yet again.
One for the comments: We’ve seen how fun can be effectively applied to wellness efforts — can the same be done for retirement planning? If you’ve got ideas, hit the comments.
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