PLANADVISER - November/December 2018 - 14

trendspotting
Aggressive
Saving
Is Simply
Essential
One projection calls
for more than $1 million
in savings
ROB Reiskytl, a partner and actuarial
retirement consultant at Aon, recently
spoke with PLANADVISER about his
firm's new white paper " The Real Deal, "
based on the Aon " 2018 Retirement
Income Adequacy Study. "
As Reiskytl pointed out, the topline
findings of the paper are sobering,
showing that only about one in three
workers will have enough put away
to retire comfortably at age 67-i.e.,
without giving up a large portion of
their average-working-year income.
Still, Reiskytl noted reasons for optimism,
including the simple fact that
employers have a tremendous amount
of influence over the saving behavior of
their workers.
According to Reiskytl and the work
of Aon researchers, one basic strategy
for assessing and discussing an individual's
retirement readiness in this
context is to compare his net savings
amount with a simple multiplier of
annual pay.
The paper suggests that the multiple
of final annual pay that the average
employee will need to have saved for
an " adequate retirement at age 67 " is
just over 11 times. In other words, an
employee making $100,000 per year
would need to have saved something
like $1.1 million by age 67 to maintain
his standard of living after leaving the
workforce.
Even as the typical worker can save
for more than four decades to prepare
for retirement, reaching this multiple
requires lifelong discipline. As the
paper says, even assuming an individual
starts diligently saving at 25 and
never stops, the proportion of annual
pay he must defer-plus the addition
of any employer match-is 16% in
order to reach the 11-times figure by
67. Today, before the employer match,
most individuals tend to save between
4% and 7% of pay.
Other findings show that " only
19% " of full-career contributors are
projected to accumulate more wealth
than they will need in retirement,
while 15% will " fall close enough, or
within two-times pay of our recommended
target. "
According to
the
white paper, reaching a minimum of
nine-times final pay saved will allow
a retiree to find at least basic financial
stability by adjusting his post-retirement
income downward.
" Still, that leaves two out of three
full-career contributing employees
who are not expected to have saved
enough to retire at 67, " Reiskytl said.
" Even with adjustments in spending,
these employees will likely need to
increase their savings or delay their
retirement. "
According to Reiskytl, one of the
most direct moves an employer can
make to promote better retirement
plan outcomes is to either increase or
" stretch the match, " so that employees
need to contribute a greater percentage
of annual pay to the plan to get the full
match.
Of course, stretching the match
has to be done carefully, Reiskytl said,
because many employees further down
on the pay scale are already stretched
thin economically and may not be able
to afford to save more to reach the full
match amount. -John Manganaro
14 | planadviser.com November-December 2018 Art by Linda Liu
http://www.planadviserdigital.com/planadviser/november_december_2018/TrackLink.action?pageName=14&exitLink=http%3A%2F%2Fplanadviser.com
PLANADVISER - November/December 2018

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