to Fidelity Investments’ new Retirement Preparedness Measure (RPM), which is
based on data from Fidelity’s 2013 Retirement Savings Assessment survey, essential
living expenses in retirement includes housing, health care and food. The RPM introduces
a single score that provides a comparison across generations, combining survey
data with the retirement planning methodology Fidelity makes available to its
the RPM, working Americans fall into four categories on the retirement
preparedness spectrum. The categories are linked to a numeric range (the higher
the better), based on an individual’s ability to cover estimated retirement
expenses, even in a down market:
Green: Very Good or Better (95 or over). These households are on track to cover
95% or more of total estimated expenses, even in a down market—33% of those surveyed
were dark green.
Good (80 to 95). On track to cover at least essential expenses, but not
discretionary expenses like travel, entertainment, etc.—12% of those surveyed
Fair (65 to 80). Not on track to sufficiently cover all essential retirement
expenses, with modest adjustments to their planned lifestyle likely—14% of
those surveyed were yellow.
Poor (less than 65). Not on track to sufficiently cover all essential
retirement expenses, with significant adjustments to their planned lifestyle
likely—41% of those surveyed were red.
According to the RPM,
many Americans are likely to fall short of meeting their retirement income
goals, unless they act soon. The median score indicates working Americans are
on track to meet just 74% of their estimated retirement expense goals and face
a 26% income gap, placing them in the “yellow zone” and forcing them to make
spending cuts in retirement that may diminish their quality of life—especially
if the market experiences a severe downturn.