That’s according to Fidelity Investments’ latest biennial Retirement Savings Assessment study, which – while mostly upbeat – also makes clear that all too many of those surveyed remain “at risk” of not being able to fully cover essential expenses in retirement if they don’t turn things around.
Specifically, after totaling up the assets of the 25- to 74-year-old respondents earning at least $20,000 annually – and that included current or expected Social Security benefits – Fidelity estimated that the typical saver is on track to have 80 percent of the income he or she will need to cover retirement costs. That’s the highest it’s been since the study was first conducted in 2005, when the same figure was 62 percent and people were just beginning to know the joys of watching videos of cats performing weird tricks.
“It’s a significant improvement,” says Ken Hevert, Fidelity’s senior vice president of retirement, who attributed the rise to both a higher median savings rate compared to 2006 (8.8 percent vs. 3.6 percent) and better portfolio asset allocation.
Even more comprehensively, four color-coded categories were used to show where households fell on a retirement preparedness spectrum based on their ability to handle estimated expenses in a down market:
* Dark Green Thirty-two percent were on target to cover more than 95 percent of their freight (up 1 percent from 2016).
* Green. Eighteen percent were looking good as far as essentials go, but not discretionary items like travel and entertainment (down 1 percent from 2016).
* Yellow. Twenty-two percent were off track, with “modest adjustments” likely required to their planned lifestyles (down 1 percent from 2016).
* Red. Twenty-eight percent definitely “need attention,” to put it kindly (up 1 percent from 2016).
Perhaps the biggest surprise in the study had to do with Millennials.
For the first time ever, those born between 1981 and 1992 surpassed the older Generation X in Fidelity’s unique cross-generations scorecard. The latter are on track to have 78 percent of the retirement income they’ll need, while the former lags behind by 1 percent – though that’s presumably after many of them dipped into their own savings to pay the college tuitions of their Millennial offspring. “Millennials are clearly putting money aside for retirement and taking more control of their personal situations,” says Hevert.
And Baby Boomers? Collectively, they’re in the best position of all, especially those Baby Boomers with increasingly rare pensions, and are on course to have set aside 86 percent of the money they’ll need.
For those curious where they stand, Fidelity allows anyone to access their retirement score online. And if you really want a cushiony retirement, keep in mind that you could have 108 percent of what you’ll need by embracing all three of the following “accelerators”: saving at least 15 percent of your income yearly; ensuring an age-appropriate asset mix; and deferring Social Security benefits till at least 66 or 67.
“While these actions taken separately are clearly helpful,” says Hevert, “doing all three could help bring you from good to great.”