The research found that less than one in five 401(k) participants at large companies will be able to meet 100% of their estimated needs in retirement, the company said in a release.

When factoring in inflation and increases in medical costs, Hewitt predicts that employees will need to replace, on average, 126% of their final pay at retirement. That percentage is significantly more than the traditional expert estimates of 70% to 90% pay replacement, the company said.

The study, which examined the projected retirement levels of nearly 2 million employees at 72 large U.S. companies using actual employee balances and behaviors, found that more than 1.2 million employees (67%) are expected to have less than 80% of their projected needs at retirement, the release said.

According to research results, the situation is more serious for employees who do not contribute to their 401(k) plans. Employees who contribute an average of 8% of pay to their plan can replace 96% of their pre-retirement income at age 65, but that number drops to 54% for those employees who do not contribute. Employees who have a pension plan may expect to replace just 62% of their income at retirement if they do not contribute to their 401(k) plan, Hewitt said.

Hewitt’s study found that employer-subsidized retiree medical coverage can help employees achieve adequate retirement savings levels. Employees who are offered a high level of employer subsidy—typically covering half of total costs not covered by Medicare—could have their retirement income shortage reduced to only 12% of final pay, rather than the average 15%, if they are saving in their 401(k) plan.

On the other hand, the fact that people are living longer is making the retirement savings picture worse. Hewitt said assuming employees need to prepare for a longer life span—approximately 10 years beyond the expected lifetime of 84 years old for someone age 65—increases the average shortfall by 80%.