(May 2, 2014) – The typical American actively saving for retirement is on track to replace 61% of their income, according to Putnam Investments' 2014 defined contribution survey.
But regardless of salary, those who have access to an on-the-job savings plan are well ahead of those who don’t.
According to the survey, the average member of a 401(k) or similar retirement vehicle could expect 75% income after he or she finished working, whereas those without such a structured plan faced just 42% of working income—even counting Social Security.
After four years of research, “the difference in retirement readiness between Americans who have access to workplace savings plans and those who don’t remains staggering, underscoring the importance of expanding the availability of these plans,” said Edmund Murphy, head of defined contribution at Putnam Investments.
“It is time for retirement policy in America to look at what is working well and then find ways to spread that success as widely as possible—across all workplace savings plans,” he continued.
The details of the plans mattered, too.
Roughly 39% of the 401(k) eligible workers surveyed said they were automatically enrolled in the savings schemes. Even including those who opted out, the median replacement income for this group was 85%, while those who were not auto-enrolled could expect 78% after retirement.
Auto-escalation made an even larger difference in median retirement income: 98% for those who had it, versus 74% for those whose plans did not.
Putnam’s annual survey included data from 4,148 working adults in the US, who were surveyed between December 2013 and January 2014.