Many households are at risk of failing to meet their financial goals for retirement as they save less than 10 percent of their salary, according to research.
Deferring 10 percent of income until retirement may put households in a position to replace as much as 50 percent of their income without accounting for Social Security. When the program is taken into account, the amount may reach as high as 84 percent, according to Putnam Investments. Researchers found that about 60 percent of households are eligible to participate in defined contribution plans and only 8 percent of those choose not to.
Still, that leaves more than 40 percent without such a plan. While these households may be saving for retirement through alternative means, researchers say that some will simply be unprepared. Those involved in employee benefit plan administration or design or placed in an advisory role should make an effort to encourage participation and a reasonable rate of contributions.
While asset allocation is typically a focus during retirement planning, the firm suggested that the savings rate is just as or even more important. Automatic enrollment and higher initial deferral rates can help employees make wise decisions for their future.
