Figure at least 70 percent of your current income, experts say. Don’t look to Social Security to provide more than 39 percent of what you’ll need. Count on living to 78 — or longer. And, to be fully financially secure, factor in expenses for poor health.
If you make $50,000 a year and retire now at full retirement age, your nest egg, according to an AARP analysis, should be $664,100. That includes $364,000, the necessary principal to withdraw 4 percent per year and another $300,000, the average medical costs for a retired couple.
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Studies show most people haven’t saved one-tenth that amount.
“We’ve got to get people saving and often,” said John Rother, director of policy and strategy for the AARP and one of dozen speakers at the National Press Foundation’s program on 21st century retirement issues last month in Washington.
Many people, Rother said, miss the fact that, even if they start drawing Social Security at 62, they’re not eligible for Medicare healthcare benefits until 65. Even then, Medicare only pays half of costs.
Barbara Bovbjerg , director of income security issues at the General Accounting Office, summed up Americans’ retirement issue this way: “People don’t have the resources to retire. They just don’t know it yet.”
The situation is a wake-up call for younger workers too.
Bovbjerg said workers in their 20s and 30s should start saving for retirement and plan to put away more, because in their golden years they likely will get less help from Uncle Sam.
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With retirement savings more important than ever, defined contribution plans, such as 401(k)s, can be successful ways to attract and retain employees, observers agree.
But at least one Oklahoma City employee benefits attorney believes many employers “need to do surgery on their current plans.”
There are companies that match part of employees’ contributions to plans, but have only 60 percent participation, said Dudley Hyde at a recent employment law seminar, sponsored by his firm, McAfee and Taft. Hyde knows of one company with 700, mostly Hispanic, employees, that has only 14 retirement plan participants.
Among other things, employers, Hyde said, need to educate their workers on the deductibility and deferment of contributions, make nominal contributions to their workers’ plan to incent them to participate (contributions are exempt from employment taxes), and dump plans with high fees.
Companies, he said, can discriminate and provide bigger matches, and certain vesting periods, to critical employees who earn less than $100,000 a year. Those, for example, may include nurses, truck drivers or other positions, for which there are major shortages.
Private companies, whose owners may not want to award everyone stock options, can offer what’s called phantom programs, which mimic company stock, he said.
Employees often are more interested in benefit packages over salary, said Oklahoma City human resources professional Jim Farris, who joined Hyde’s presentation. “There are two traits common among organizations that attract and retain the best employees,” he said. Their pay and benefits are great, and they treat their employees great.”
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