If you put 10% of your paycheck into savings, you should be able to retire

WASHINGTON -- With traditional pensions on the wane, wages for typical workers flat-lining and many people living longer, it is no secret that Americans face an ever-increasing challenge to achieve financial security in retirement.

Most are not meeting the test. The Center for Retirement Research at Boston College estimates that 53 percent of households are at risk of not being able to maintain their standard of living once they retire.

But many investment managers argue that financial security is actually within reach for most Americans, if only they took some simple steps -- and stuck with them. It may seem like a self-serving declaration for an industry that makes billions managing trillions in retirement savings. Yet a survey released Monday by Empower Institute, a newly launched research arm of the nation's second largest retirement services provider, Empower Retirement, makes the case.

The survey of 4,000 Americans found that people were on pace toward a comfortable retirement if several factors are in place:

- They have access to a retirement savings plan at work.

- They participate in the plan, setting aside at least 10 percent of their income.

- If they set aside less, the plans should automatically escalate to 10 percent.

- They have a professional financial adviser.

Of course, it's not always that simple. To begin with, only three out of four full-time private sector employees have access to a retirement plan at work. Access falls to 37 percent for part-time workers, the government says. Those workers could open IRAs privately, but very few do. And these calculations assume continuous employment through a person's working years -- not always a guarantee as we saw during the recession.

But for workers who do have access to a retirement plan at work, the study points the way to retirement security. The survey asked respondents about the entire range of their financial assets, from home equity, savings and retirement accounts, to projected Social Security income. Overall, it found, working Americans are on pace to replace 58 percent of their income in retirement. Many retirement planners say the optimal replacement rate is between 70 and 80 percent.

In some cases, people were keeping too much money in cash accounts, instead of investing in the stock market -- which points to the need for better advice. But by far the most important factor in achieving retirement security was the amount of money people set aside to begin with, the survey found. The level of financial security rose with the percentage of pay workers set aside in tax-deferred retirement accounts, the survey found. And if they made a habit of saving at 10 percent of pay and did not raid the money to pay for emergencies, they found themselves on pace to replace all their income in retirement.

That money is certainly needed, as many Americans are carrying debt into retirement. Also, the survey found, with the vast majority of American households heading to retirement grappling with at least one family member managing a chronic illness like diabetes or high blood pressure, or a high-risk activity like smoking, many people underestimate their future health care costs.

“The country is facing a retirement savings challenge, for sure,” said Edmund Murphy, president of Empower Retirement, a sister company of Putnam Investments. He added: “The hurdles for millions of individuals to secure a sustainable, dignified retirement seem daunting, yet are achievable.”

• Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.