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Tough Economy Hurting U.S. Workers' Retirement Readiness, According to New Aon Hewitt Analysis
Maintaining Long-Term Focus Through Market Disruptions Will Help Workers Take Control of Their Retirement Savings

LINCOLNSHIRE, Ill., September 2, 2011 – Continued market instability has left many employees wondering if their 401(k) savings will be enough to meet their retirement goals, and rightfully so. A new analysis from Aon Hewitt, the global human resources consulting and outsourcing business of Aon Corporation (NYSE: AON), reveals that four-in-five Americans are still not adequately prepared to meet their needs in retirement.

According to Aon Hewitt’s projections based on 2.1 million U.S. employees, the average worker will need 11 times their final pay in retirement (after accounting for social security) in order to meet their retirement needs. However, as of the beginning of 2011, the average full-career employee, who is actively contributing to their defined contribution (DC) plan, is projected to have a shortfall of 2.2 times pay at retirement age. Fully half of full-career workers are expected to have a gap of greater than two times pay at retirement. Aon Hewitt projects that the impact of the most recent market volatility in late July and August will increase the average employee’s savings shortfall to 2.4 times pay.

“Workers need to examine their long-term savings plan to determine if they’re properly prepared for retirement,” said Rob Reiskytl, leader of Retirement Plan Strategy and Design at Aon Hewitt. “With the most recent market volatility, it’s tempting to make a knee-jerk reaction, but now more than ever, it’s important for employees to keep their eye on their long-term savings goals and investment strategies.”

Market volatility over the past three years has made saving even more difficult for many employees. The median rate of return for defined contribution accounts has fluctuated wildly since 2008, with a low of negative 28 percent, rebounding to positive 24 percent in 2009, and a positive 13.5 percent in 2010. As of mid-August, 2011, initial indications show many defined contribution accounts have experienced investment losses this year.  

“The good news is that short-term drops in the market won’t impact most employees’ long-term savings outlook,” explains Reiskytl. “They’ll be able to make-up ground by continuing to contribute to their DC plan, and through generally positive market returns over the course of their life time. However, these market events can really hurt those workers nearing retirement because they have less time to adjust to market fluctuations.”

In addition to market volatility, suspending contributions to a 401(k) during the down economy also significantly hampered workers’ savings goals. For those employees (11.2 percent) who stopped contributing to their 401(k) plan and lost their employer’s matching contribution in 2008, plan balances at the end of 2010 have yet to recover to pre-recession levels. An average employee who did not contribute to their retirement savings plan from 2008 through 2010 would have a balance of $88,000 at the end of 2010, down from $91,000 at the beginning of 2008. On the other hand, if that same employee had continued to actively contribute to their plan, their account balance would have grown to $128,000 during the same period.  

Making up for the shortfall
Workers can make a few adjustments in order to eliminate the savings shortfall and ensure they are ready for retirement:

Retire later. Aon Hewitt’s analysis shows that delaying retirement even two years can help workers make up their savings shortfall. For an average 40 year old worker currently saving at a rate of 8 percent per year, retiring at age 65 is expected to result in a savings shortfall of 1.7 times pay. However, by extending employment just two years to age 67, that worker may be able to close the savings gap. For an average 60 year old worker saving at 10 percent annually, who has a shortfall of 2.3 times pay, retirement may have to be delayed to age 68 in order to make up for the shortfall.

Save more. According to recent Aon Hewitt research, nearly 30 percent of employees did not contribute enough to their employer provided DC plan to receive the full company match. Workers who choose to increase their yearly contribution rate by just a few percentage points can dramatically improve their situation. For example, if that same 40 year old worker, saving at a rate of 8 percent of pay per year, increases their savings rate 4 percentage points to 12 percent per year, they will close their savings gap and should be on track to retire at age 65.

Seek expert help. Aon Hewitt’s research shows that 74 percent of companies offer outside investment advisory services to employees, up from 50 percent in 2009. However, most employees (75 percent) are not taking advantage of this help. Making the most of these services may give workers the leg up they need to meet their retirement savings goals.

“The bottom line is that workers need to be proactive about saving for their future,” stressed Reiskytl. “Ideally, the younger you are when you start saving, and the more you can put away, the better. However, it’s not too late for workers who’ve gotten a late start or have been saving at a low rate. Making small adjustments to your savings rate, delaying retirement a few years, or just making sure your investments are sound, may be all you need to do to make sure you have enough money saved for retirement.”

About Aon Hewitt
Aon Hewitt is the global leader in human resource consulting and outsourcing solutions.  The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance.  Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies.  With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees.  For more information on Aon Hewitt, please visit

About Aon
Aon Corporation (NYSE:AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human resources solutions and outsourcing. Through its more than 59,000 colleagues worldwide, Aon unites to deliver distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally in over 120 countries. Named the world's best broker by Euromoney magazine's 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary 2007-2010, best reinsurance intermediary 2006-2010, best captives manager 2009-2010, and best employee benefits consulting firm 2007-2009 by the readers of Business Insurance. Visit for more information on Aon and to learn about Aon's global partnership and shirt sponsorship with Manchester United.


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