Retirement Readiness May Be Better Than Thought

December 16, 2013 ( – The amount employees have saved for retirement may be higher than the retirement plan industry thinks, according to an analysis from Towers Watson.

The consulting firm’s analysis, “Retirement Savings: How Much Do Workers Really Have?,” looks at estimates of employees’ retirement savings and benefits, not only from the retirement plan of their current employer but also from other sources. Some of the other sources of retirement savings include individual retirement accounts, pensions from previous jobs (from the employee, or their spouse or partner), pensions belonging to a spouse or partner, and pensions belonging to former spouses or family members to which they have some right. The analysis does not factor in Social Security benefits.

The analysis finds retirement savings vary. The median accumulation is $79,300 and the average is $187,100. About 70% of workers have a defined contribution (DC) plan at their current job and about 33% have a defined benefit (DB) plan.

For most workers surveyed, retirement plans sponsored by their current employer are their primary savings vehicles for retirement. However, the data indicates that other sources of pensions and benefits are substantial, so omitting them underestimates the savings preparedness of 45% of workers.

The percentage of workers with outside savings is 56% among those ages 51 through 60, this compared with 34% among those ages 30 to 40. According the analysis, this difference is probably due to the fact that older workers have likely had multiple jobs over their lifetime. The median amount of such savings is also bigger among older workers—$49,000 for the older group versus $30,000 for the younger group.

The analysis concludes that many workers have “substantial savings outside of their current employer’s plans, which suggests that workers’ retirement prospects might be brighter than it appears from their current-job savings.”

The data comes from a survey of consumer finances done by the Federal Reserve Board in 2010. Details compiled include employee income, savings, benefits, investments and demographic characters. Respondents are between 30 and 60 years old, and work for companies with more than 100 employees. More information about the analysis can be found here.