US Workers’ Retirement Readiness Declines Amid Market Volatility

New research indicates American savers are less ready for retirement than in previous years. America’s Retirement Score has fallen from 83, an all-time high, in 2020 back into the yellow at 78 in 2022. The assessment predicted savers only have 78% of the income needed to cover their retirement expenses.  

Fidelity Investments’ Retirement Savings Assessment examined the overall retirement readiness of American households by conducting an online survey of 3,569 working households between August 2022 and September 2022. Fidelity noted that the report is based on a household’s ability to cover estimated retirement expenses in a down market. 

On the preparedness spectrum, more than 34% of households are in the red, according to Fidelity, indicating more than a third of Americans may have to make notable lifestyle changes in retirement. Overall, the research estimates more than 52% of respondents will have to take on modest to significant lifestyle adjustments. 

The challenging financial environment has driven the decline in retirement preparedness. Fidelity cites the COVID-19 pandemic, market volatility and the most recent unrest in the banking industry as financial stressors. In response, people put less in savings and invest more conservatively. Among participants who have adopted a conservative approach, 57% are concerned about aggressive investing and losing their savings.  

Americans across all generations have seen their asset balances increase, up by $40,000 since 2020, but saving levels differ by age groups. Millennials decreased their savings rate by 0.2% and Boomers by 2.2%, while Gen Xers increased their savings rate by 1.4%. However, Millennials had the largest increase in median income since 2020, up by $12,500, while Gen Xers’ income has remained about the same.  

Fidelity found that age-appropriate equity allocations have declined, dropping 0.6 percentage points from 2020 to 59.4% in 2022. Fidelity experts reported that Millennials experienced the largest drop in the percentage of age-appropriate equity allocations.  

“American savers continue to navigate through uncertainty, and as a result, may consider pulling back on saving for the future,” said Rita Assaf, vice president of retirement at Fidelity, in a statement. “When it comes to long-term investing, staying focused on your individual goals is critical. Having a plan in place is one solid way to help weather any storm, as we’ve seen the last few years and weeks with the pandemic, inflation, and market volatility.”