Nest Egg Blues
Gap Widens between Retirement Needs, Savings

SOME 80 PERCENT of workers who contribute a decent amount of money to their company-sponsored plans will not be able to adequately support themselves during retirement. Factoring in inflation and increases in medical expenses during retirement, a new Hewitt Associates report estimates that employees will need to replace an average of 126 percent of their salary at retirement just to make ends meet. This is significantly more than the traditional targets of 70 to 90 percent pay replacement.

Employees who actively contribute 8 percent of their salaries into their companies' 401(k) plans over the course of their careers can replace 96 percent of their pre-retirement income at age 65, or roughly 80 percent of what Hewitt deems necessary to battle inflation and rising health care costs, according to the report.

On the other hand, new analysis by the Employee Benefit Research Institute finds that the automatic 401(k) features enacted by the Pension Protection Act have a very significant positive impact in generating additional retirement savings for many workers, especially for low-income workers. However, auto-enrollment alone will not be enough for certain workers to be able to meet savings targets. Additional resources will still be needed for many workers.

The scenario becomes even more serious for employees who do not contribute to their 401(k) plans. For example, recent Hewitt research shows that more than a quarter (26%) of employees do not participate in their 401(k) plan, and of those that do, most (61%) contribute less than 7 percent a year.

"Without changes in behavior, most workers will either need to significantly reduce their spending or work longer in order to have enough to last through retirement," says Alison Borland, Hewitt Associates defined contribution consulting practice leader. "When employees learn how much they need to save in order to maintain a comfortable standard of living in retirement, the numbers seem overwhelming and unattainable," comments Borland. "But small, incremental changes to saving and investing habits can truly have a big impact."
 

Topping the Charts
Groups Keep Health Care Reform Agenda Alive

HEALTH CARE for America Now, a coalition of unions, think tanks, and other groups, has launched a $40 million advertising campaign to promote affordable health care coverage for all and to ensure that health care reform tops the U.S. political agenda after the November elections. The new group says it wants to keep the best of what already exists, without moving to a fully nationalized system.

"This is the human rights movement of our time," says Jeff Blum, executive director of USAction, a nonprofit that campaigns for strengthening Medicare, Social Security, and other entitlements. Another camp, an AARP-led group acting on behalf of the Divided We Fail coalition, plans to spend more than $20 million in cable ads through Labor Day to push for bipartisan solutions to health care and Social Security.

At the opposite end, the Centers for Disease Control and Prevention (CDC) has launched the Healthiest Nation Campaign to keep Americans healthy by integrating health into social policies across all sections and at all levels of government, according to Julie Gerberding, CDC director. "People are talking about health care reform, but they're not really talking about health," says Gerberding.

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• The Center for Medicare & Medicaid Services (CMS) has updated disclosure notices to be used after June 15, 2008 for Medicare Part D eligible individuals. These replace the model notices that were issued in 2007. The new disclosure notices are available at: http://www.cms.hhs.gov/CreditableCoverage/09_CCafterJune15.asp#TopOfPage