Employees See Hard-Won Progress on Readiness

Nearly half of employees are expected to be able to meet essential retirement expenses, up from 38% two years ago, Fidelity says.

Because people are saving more and investing more appropriately for their age, the percentage of people who are likely to afford at least their essential expenses in retirement has risen to 45%, up from 38% when Fidelity Investments last conducted its biennial Retirement Savings Assessment study.

However, Fidelity notes, this still means that more than half of the population (55%) may not be able to cover housing, health care or food costs. Fidelity’s Retirement Savings Assessment is based on a Retirement Preparedness Measure (RPM) that is based on a survey of 4,650 survey responses. The RPM gives households a percentage score that falls into four categories on the retirement preparedness spectrum. Households that are on track to cover more than 95% of estimated expenses are given a code of dark green. Only 27% of households are in this category, up from 23% in 2013.

Those that fall into the green category are on track to cover between 81% and 95% of essential expenses. Eighteen percent of households are in this category, up from 15% in 2013. Those that are in the yellow category are on track to meet between 65% and 80% of essential expenses. Twenty three percent fall into this group, up from 19% in 2013.

Finally, those that are in the red category are on track to meet less than 65% of their essential expenses. Although 32% are in the red, the number is significantly less than 2013, when 43% fell into this category.

The average RPM of all respondents is a 76, putting them squarely in the yellow zone and indicating that they need to improve their retirement outlook. Looking at the data another way, Fidelity says the good news is that Americans are only five percentage points away from landing into the green zone—a significant improvement from 2013, when the score was 69 and Americans were 12 percentage points away from the green zone.

NEXT: Savings rates

Fidelity found that Americans’ median savings rates increase from 7.3% to 8.5%. Millennials showed the greatest improvement, increasing from 5.8% to 7.5%. Boomers saved the most, stashing away 9.7% of their salaries, up from 8.1%. Fidelity found that more people are directing their savings to an age-appropriate portfolio; in 2015, 62% of people had done so, up from 56% in 2013.

“Even in the midst of unsteady market conditions and pockets of global instability, it’s extremely encouraging that so many people have taken positive steps to improve their ability to live comfortably in retirement, with many saving more, spending less and making smart investment decisions,” says John Sweeney, executive vice president of retirement and investment strategies at Fidelity. “While many aren’t completely on track, there are steps people can take—regardless of age or income level—to get on the path to green and plan for their ‘someday.’”

By age, Baby Boomers achieved an RPM score of 82, Gen X got an RPM score of 73 and Millennials a 70.

Fidelity suggests three steps that participants can take to improve their retirement preparedness: save more, review your asset mix and retire later. 

“Our analysis shows that using these three ‘accelerators’—either individually or in combination—can have a substantial impact on retirement readiness,” Sweeney says. “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.”