Rising medical costs, lengthening life spans, and the declining prevalence of pension and retiree medical benefits continue to widen the gap between the amount of savings U.S. employees need in order to maintain their standard of living in retirement and what their employer programs are projected to provide.

The Hewitt survey titled Total Retirement Income at Large Companies: The Real Deal 2008 examined the projected retirement levels of nearly 2 million employees at 72 large U.S. companies using actual employee data and behaviors. The study measured projected retirement income and retirement needs, and also quantified the impact of longevity risk, different employer plan structures, and gender.

The study revealed that less than one in five U.S. employees (19 percent) will be able to meet 100 percent of their estimated needs in retirement. On average, employees are projected to replace just 85 percent of their income in retirement, compared to the 126 percent they need. In other words, assuming inflation of 3 percent and a retirement age of 65, an average 40 year old with 10 years of service and earning $83,000 at retirement in today's dollars would have saved enough to provide just $70,500 per year in retirement in today's dollars — a $34,000 annual shortfall. In fact, more than 1.2 million employees (67 percent) are expected to have less than 80 percent of their projected needs at retirement.

Employees who contribute to their 401(k) plan and who are willing to make small improvements to their saving and investing habits can make a significant impact in lessening the gap and increasing their future income potential.

To view highlights from Total Retirement Income at Large Companies: The Real Deal 2008 study findings, click the link below.

Copies of the complete report are availble for $600 USD by contacting the Hewitt Information Desk at (847) 295-5000 or via email at infodesk@hewitt.com.