Hewitt released the results from its “Total Retirement Income at Large Companies: The Real Deal 2008” report this morning. If you’re already worried about how you’re going to make ends meet in retirement, the study results probably aren’t going to help.

The Real Deal 2008 discovered that the typical retiree will need to replace 126 percent of his or her pre-retirement income. That means, if you’re earning $100,000, you’ll need to find a way to bring in $126,000 in retirement to make ends meet. This number is up substantially from the 70 to 90 percent of pre-retirement that many financial advisors suggest you’ll need.

Why the dramatic increase? Inflation and increased medical costs, the study says. Other key findings:

  • Employees who contribute an average of 8 percent of pay to their 401(k) plan can replace 96 percent of their preretirement income at age 65, providing approximately 80 percent of what is needed to provide the same standard of living during retirement. That number drops to just 54 percent for those employees who do not contribute, which equates to less than 40 percent of projected needs.

  • Employees who are offered a high level of employer subsidized medical coverage in retirement – typically covering half of total costs not covered by Medicare – will see a projected retirement income shortage of only 12 percent of final pay if they are saving in their 401(k) plan. This number doubles to 25 percent for employees with only access to coverage and no employer subsidy, and jumps to 87 percent for employees with low retiree medical coverage who do not contribute to their 401(k) plan.

  • Employees can boost their projected retirement income replacement from 85 percent to 107 percent of final pay simply by contributing 2 percent more a year (an average of 10 percent total contribution) to their 401(k) plan and retiring just 2 years later -at age 67.

It’s tough to think about funding retirement when a gallon of gas is competing with a gallon of milk in cost. But imagine how expensive gas and milk are going to be when you decide to stop working and enjoy some well-deserved time off. It would be nice to know that you’ve got enough stashed away to actually go somewhere with the gas you buy and eat something with the milk you drink.

July 1, 2008.