A recent study shows retirement planning has gotten better, but there’s still room for improvement.
A new study by Fidelity Investments® indicates more Americans are successfully preparing for retirement, but over half are still not saving enough.
In its most recent Retirement Savings Assessment, Fidelity found that 45% of U.S. households earn a “Good” or “On Track” rating when using its new Retirement Score tool. On the other hand, 55% get a “Fair” or “Needs Attention” rating, which means they may have to make significant sacrifices during retirement if they don’t boost their readiness.
However, retirement planning has significantly improved since the last assessment in 2013:
- 27% of households are “On Track”, up from 23%
- 18% receive a “Good” rating, up from 15%
- 23% get a score of “Fair”, up from 19%
- And most importantly, 32% fall into the “Needs Attention” category – down from 43%
Fidelity also found a significant difference in retirement readiness among the three generations that make up most of today’s workforce.
Baby Boomers, who currently fall into the 51-69 age range, have an average score of “Good”. But retirement is fast approaching for many, leaving them with less time and fewer options to make up any shortfall. For Boomers who do need to improve their preparedness, working longer is probably the best option.
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Generation X, currently aged 35-50, received an average rating of “Fair”. Fortunately, they still have 15 years or longer to make it into the “Good” or “On Track” categories. Gen Xers who want to better prepare for retirement should increase how much they’re saving and perhaps consider working longer.
Millennials, who are now in the 25-34 age range, also have an average rating of “Fair”. But that’s up from “Needs Attention” in 2013, so the youngest working generation has taken a big step forward. Millennials have time on their side; those who want to improve their retirement readiness can save and invest more.
Overall, Fidelity recommends that anyone who wants to maximize their chances of a comfortable retirement should use three “accelerators” to improve readiness: save more, since even small increases can have large effects over time; have an age-appropriate asset mix, as a properly diversified portfolio strikes the best balance between risk and return; and work as long as possible, since waiting until full retirement age can boost social security income by as much as 30%.
“Our analysis shows that using these three ‘accelerators’—either individually or in combination—can have a substantial impact on retirement readiness,” John Sweeney, executive vice president of retirement and investment strategies at Fidelity, said in a press release. “In fact, when all three are applied, America’s retirement score jumps all the way to 100, putting many more individuals in a better financial position to truly enjoy their retirement years.”
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