Being a payroll company that provides payroll services to the New England area, we have by necessity become familiar with the concept of saving for retirement. After all, we are the ones responsible for directing the appropriate funds from innumerable paychecks into the appropriate accounts in order to help our clients attend to the retirement needs of their employees. We take care of payroll in MA as well as payroll in NH, Connecticut and New England, an ongoing business effort that has given us a healthy respect for the importance of saving for retirement – and saving wisely.
Such is why we would like to inform our clients of a recent study by be Employee Benefit Research Institute, (EBRI), which seeks to shed some light on the mystery of how much employees need to put aside for retirement savings given their current age. Taking age into account is important, because that determines how long the worker has to amass the appropriate amount of money needed to retire successfully. For the purpose of the study, a successful retirement was declared to be one in which the employee would not run out of money during the course of retirement while taking into account average living expenses and health care costs not covered by insurance. It is important to note here that women need to save more money for retirement than men do, as on average they have a longer life span.
EBRI, using its Retirement Security Projection Model, (RSPM), was able to come up with the following guidelines for employees trying to save for retirement:
>For a 25 year old male making $40,000 a year who has no previous savings, a total combined contribution, (employee and employer matching), of 6.4% would have only a 75% chance of retirement income adequacy by the time he reached 65.
>A 40 year old man, however, at the same income and contribution rate, would have only a 50% probability of adequacy, given the shorter amount of time left until retirement. Were he 55 by the time he started saving, he would have to start packing away almost 25% of each paycheck just to obtain the same odds of adequacy.
Keep in mind that women will likely need to save a little more in order to obtain the same probabilities of adequacy, as mentioned above. The golden rule remains as many of us have always understood it – the more money you save, the more likely you are to have a successful retirement when the time comes.
So what can employers and employees do with this knowledge? Share it! Knowledge is power, and the more people know about how to properly save for retirement, they more likely they are to do so successfully.
If you have any questions about the payroll aspect of retirement savings, or if you want to know more about abc Payroll and the payroll services we offer, please call us at 978-251-3003 today!
