Products February 24, 2009

Transamerica Launches RECOVER Program for Participants

Transamerica Retirement Services said it has launched a program to help retirement plan participants weather the financial storm, create a successful investment plan, and regain confidence in their financial future.
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According to a press release, The RECOVER Plan by Transamerica is designed to help participants understand the causes of the economic situation, the cycles of the financial markets, and how to evaluate and improve their prospects for retirement.

The announcement said RECOVER stands for:

  • Recognize the events that led us to this economic situation and understand that financial markets are cyclical;
  • Evaluate your current situation;
  • Calculate your retirement income goals and determine how much you need to save for retirement;
  • Organize your budget to determine how much you can save;
  • Verify that your investment strategy corresponds to your risk tolerance;
  • Execute any necessary changes;
  • Regain control of your Retirement Dreams.

The program guides participants through the process with the help of a workbook and video presentation. The workbook walks participants through a process to understand and assess their current financial situation, identify how much they are actually able to save towards retirement, and the types of investment choices to consider, and also includes instructions on how to make account contributions and investment changes quickly and easily. The accompanying video presentation works in tandem with the workbook to help guide participants through the program.

The program is available on the Transamerica participant Web site as a Flash file and downloadable PDF. A DVD and workbook are also available.

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Data & Research February 24, 2009

Market Woes Have Widened Retirement Savings Gap

While participants realize their retirement savings have taken a hit with the market downturn of the past year, they might not know just what that hit means for their retirement income goals.
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A new Hewitt Associates analysis indicates the gap between what employees are saving and what they need to save is even greater following the market downturn.

In July, Hewitt predicted that employees needed to replace, on average, 126% of their final pay at retirement, after factoring in inflation and increases in medical costs. However, most workers at large companies were on track to replace just 85% of their income (see “Participants at Large Companies Fall Short in Savings“). After factoring in the effects of the recent market downfall—where average 401(k) accounts decreased 18% during 2008—a new Hewitt analysis shows that most workers are now on track to replace just 81% of their income.

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In other words, Hewitt said, a typical 55-year-old employee with a current average 401(k) savings rate of 10% will need to save an additional 12% each year until age 65, or work two more years, to replace what was lost in 2008. The average 40-year-old with a current average 401(k) savings rate of 7% must work one more year or save an additional 1% of pay per year until age 65, according to the news release.

Even if employees are able to recoup their losses from the recent market tumble, Hewitt found projected retirement income levels are still expected to fall short. According to Hewitt’s analysis, before the financial downturn, an average 40-year-old with 10 years of service, earning $83,000 at retirement, in today’s dollars needed to save enough to provide $104,500 per year in retirement, but was only saving enough to provide $70,500—a $34,000 annual shortfall. Since the downturn, that shortfall has grown to $37,350 a year, or a lump sum amount of approximately $400,000.


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