Americans on Target to Have 80% of the Income They Will Need in Retirement

Americans’ retirement score has reached a high of 80, meaning that they will have 80% of the income they will need in retirement, according to a survey of 3,100 people by Fidelity Investments. This is a marked improvement from 2005, when the score was 62. However, Fidelity ranks the score of 80 as fair, meaning that there is still a good amount of work that needs to be done.

Thirty-two percent of households are in the dark green zone, meaning that they are on target to cover more than 95% of total estimated expenses. Eighteen percent are in the green zone, meaning that they are on target for essential expenses, but not discretionary expenses, such as travel and entertainment. Twenty-two percent are in the yellow zone, indicating that they are not on target and will need to make modest adjustments to their planned lifestyle, and 28% are in the red zone, which means they are not on target and will need to make significant adjustments to their lifestyle.

By age, Baby Boomers have an average score of 86. For Gen X, this is 77, and for Millennials, 78.

“Millennials are clearly putting money aside for retirement and taking more control of their personal situations to ensure a financially secure future,” says Ken Hevert, senior vice president of retirement at Fidelity. “While younger generations typically don’t have jobs with access to pensions, there are many actions that can be taken to improve retirement readiness, including saving more, managing debt and making smart investment decisions.”

The reason why there has been an improvement in Americans’ retirement score, Fidelity says, is because people are saving more, with the average savings rate in the nation being 8.8%, up from 3.6% in 2006. Boomers are saving the most: 9.9%, up from 9.7% in 2006. Millennials are saving 7.5%, on par with 2006. However, Fidelity maintains that people should be saving 15% of their income to be on track for a secure retirement.

The percentage of people who have the correct asset allocation is 55%, down slightly from 57% in 2016 but up from 48% in 2006. Fidelity says the reason why people are appropriately invested is primarily because target-date funds (TDFs) are commonly used as the default investment in plans that automatically enroll participants.

Fidelity says people can also improve their retirement score by investing in health savings accounts (HSAs). In fact, people who own an HSA have an average retirement score of 84; those without have an average score of 79.

Fidelity conducted its online survey for the retirement score last September and October with the help of GfK Public Affairs and Corporate Communication. Individuals can assess their own retirement scores here.