We all know it's important to save for retirement. But how many of us are actually on track to solvently retire at age 65? Achieving adequate retirement income is a matter of increasing concern not only for employees, but also for employers that sponsor retirement plans and for the government. Efforts by companies to help employees save for retirement are improving retirement saving and investing behaviors. However, many employees in the U.S. are still not financially prepared for retirement. Longer life spans, suboptimal savings and investment decisions, potential Social Security insolvency, and rising medical costs are factors that contribute to retirement security concerns.

During our webcast, Retirement Reality: The Facts and Fiction of Income Adequacy, Alison Borland, Hewitt's Defined Contribution Consulting Practice Leader, and Hewitt thought leaders Rob Reiskytl and Barb Hogg discuss the current state of the retirement landscape. They examine strategies that work and present results from Hewitt's survey Total Retirement Income at Large Companies: The Real Deal 2008.

Here are some of the questions people asked our experts during the webcast:

Question: Are defined contribution (DC) plans a disaster waiting to happen?

Answer: If employees are not engaged in their plan and making good decisions, many of them will be left with empty wallets in their retirement years. Based on the results of our study, there is a lot of room for improvement. However, employees who have saved or are projected to save throughout their career are on track to replace more than 100% income with a DC plan. Most employees would see a dramatic improvement in closing the income adequacy gap by saving a little more, investing a little smarter, and delaying retirement (just a little). When DC plans are used well, employees can receive more than adequate income in their retirement years.

We do expect to see changes in the future as a result of retirement income inadequacy, such as an increase in phased retirement programs that allow employees to retire gradually, over time. We may also see congressional assistance/policy changes that will enable employers to offer different solutions to help employees who are not equipped to make the best decisions on their own.

Question: What's the right amount for employees to save?

Answer: It depends on the starting point and the type of retirement plan that's available to the employee. Generally, if the employee is covered by a defined benefit (DB) plan, the old rule of thumb that suggests 10% might still hold true. If the employee is not covered by a DB plan, the employee may need to save 12%, 14%, or even more, depending on the age he or she begins.

Question: What are employers doing to get employees on board with saving for retirement?

Answer: Automation is making a difference with getting employees on the right track to start, but it is still important for employees to customize their savings choices to their own personal situation. Employers are also creating decision points to help employees focus on retirement on an ongoing basis, often at least once a year. An example of this is combining retirement planning decisions with annual health care enrollment. We're seeing other new approaches emerge, reflecting increasing diversity in the workforce, with employers segmenting groups to help target those who aren't effectively using retirement plans.

We must remember that each employee is unique. The goal is to help employees focus on retirement to achieve the level of income adequacy at which they are most comfortable.

About Our Expert
Alison Borland is a Principal at Hewitt and the Defined Contribution Consulting Practice Leader. She also serves as a leader of Hewitt's retirement research team. Alison is frequently quoted in publications, most recently in USA Today, The New York Times, and CNNMoney. Alison graduated summa cum laude from Vanderbilt University and is a Fellow of the Society of Actuaries and an Enrolled Actuary. She has been with Hewitt for 8 years.

Additional Hewitt Retirement Survey Results

Hewitt's survey 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 needs, and also quantified the impact of longevity risk, different employer plan structures, and gender.

For Hot Topics in Retirement 2008, Hewitt surveyed HR professionals to learn their likely areas of focus and action over the coming year regarding the design, management, and delivery of their defined contribution, defined benefit, and retiree medical plans for their active, salaried U.S. employees. Responses from 190 employers provide a preview of the changes likely to take place in the retirement landscape over the next year. Plan sponsors can use this information to gain context and perspective as they address the challenges posed by today's unique environment.