A disturbing trend of withering pension packages and employee benefits may force American employees t0 spend more years in the workforce to meet their retirement goals, according to the findings of a new study released by Hewitt Associates.
Trends pointing toward shrinking medical benefits and decreasing employer-provided pension funds are taking a toll on American workers, who are falling further behind their stated goal of replicating at least 85% their incomes during retirement.
Employees who have access to a defined-contribution pension, such as a 401(k) plan, without the added support of an employer-sponsored retirement program are on track to replace only 80% of their pre-retirement incomes, according to Hewitt’s study, which crunched data from nearly one million workers at 62 large U.S. firms.
Other workers who benefited from voluntary contribution retirement plans and employer-sponsored programs were on pace to replace more than 107% of their incomes during retirement. The study also noted that workers who prolonged their retirement to age 67 from the average age of 65 and contributed an extra 2% of their working incomes to voluntary pension accounts stood a greater chance of meeting their retirement goals.
The projected retirement income shortfall for workers who refrain from participating in their companies' 401(k) plans jumps significantly. More than 30% the employees examined by the study opted out of their 401(k) plans. "This is a wake-up call for employees," said Lori Lucas, director of participant research at Hewitt. "They don't realize that new retirement trends will severely impact this picture and shift much more responsibility to them to prepare and save for their retirement."
Hewitt's study also concluded that employer-sponsored health care benefits are a major factor in employees' efforts at saving for retirement. Medical costs in some cases consumed 20% of the pre-retirement earnings of workers who lacked employer-sponsored health care benefits. The pre-retirement health care costs dropped to 5% for individuals who enjoyed employer-sponsored health care benefits. Retirement incomes fell to 59% of pre-retirement wages among individuals who retired without medical benefits.

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