I'll leave you alone for a minute so you can let the marinate for a while.
Still with me? Good. Here's more:
Hewitt Associates is more pessimistic than most. New research that the consulting firm plans to release Tuesday projects that workers will need to replace, on average, 126% of their final pay in retirement. The study, based on 1.8 million employees with 401(k) plans that Hewitt administers, says only 19% of participants are on track to meet their retirement needs. About 67% of workers are expected to have less than 80% of their projected needs.
Sheryl Garrett, founder of the Garrett Planning Network, agrees that typical retirement replacement guidelines "just don't go far enough when you factor in the huge health care responsibility that is shifting from the employer's shoulders to ours at retirement."
Personally, I always calculated that I would need at least 100% of my income in retirement, hence why 20% of my pre-tax income goes into my 401k. I believe I will need at least that for:
1. Health care. Seriously. In 30 years, medical benefits for retirees from your employer will not exist. That means a huge jump in health care costs. I guesstimate that in 30 years, I can expect my health care costs to be close to $500,000. Sounds like a lot, because it is. Also...
2. I'm single with no children or spouse to look after me. That means I'll have to pay someone to do it.
3. I do not own a home. If I don't buy one and have it paid off before I retire, that means I will be renting during retirement.
So while that 126% sounds like a lot, it makes a lot of sense to me and my situation. I think at this point if they want more people invest for retirement, then they need to talk very clearly about fees and the long-term damage it can do to one's portfolio. But that's just me.