Millennials Retirement Readiness Fell the Most From 2020

Average retirement account balances increased by 5% from last quarter, in positive movements.  

Declining retirement readiness scores show that Millennials may have to work longer to ensure they are prepared to retire, according to Fidelity Investments data measuring plan participant’s retirement readiness.

Following the cascade of economic effects from the COVID-19 pandemic and amidst continuing market volatility, retirement readiness for Millennials’ —individuals age 27 to 42—declined to 72 in 2023 from 82 in 2020, the greatest decline for a generational cohort, according to Fidelity’s retirement analysis.  

Baby Boomers’, ages 59 to 77, retirement readiness scores stayed flat at 87 in 2023; and Gen X workers’, ages 43 to 58, readiness scores dropped to 79 in 2023 from 80 in 2023, data shows.

“Americans have experienced some tumultuous years, but through Congress’ investment in retirement savings through the Secure Act of 2019, as well as individuals’ continued commitment to save, we are optimistic for the future of retirement security,” Kevin Barry, president of workplace investing at Fidelity Investments, said in a press release with Q1 2023 Retirement Analysis.

The multinational financial services corporations’ research shows retirement readiness scores for the typical American household—on a scale from one to 150—expressed as a percent, to show if savers are on track to meet estimated retirement income needs.   

Overall, retirement readiness declined by five points last year to 78 from 83—after reaching an apex in 2020—signifying savers have accumulated 78% of the income needed to cover retirement costs in a down market, according to Fidelity Investments research published in March.

On a positive note, the average 401(k) balances increased to $108,200, up 4% from Q4 2022 and 5% from five years ago, the analysis finds.

Plan sponsors should help participants prepare for retirement by reinforcing positive steps plan participants can take, Fidelity said. The assessment includes recommendations for plan sponsors to help each generation to increase their retirement readiness.

“As Boomers get closer to retirement, being clear on your goals and having a plan in place can make a big difference in ensuring your savings last,” said Fidelity.

  • Fidelity’s assessment included advice for participants according to their generation. The recordkeeper advised Baby Boomers to ask key questions, including whether they should delay Social Security, where their income sources will come from, and what their strategy will be for taking income from retirement accounts.

Fidelity encouraged Generation X workers to continue saving.

“Gen X-ers are in their prime earning years and may still have a long time before retirement to save and invest, so there’s plenty of time for your money to potentially grow,” the assessment says. “Individuals 50 and above can even leverage catchup contributions to boost savings.”

Fidelity recommended Gen Xers ask themselves how much they will need in income when they retire and how they can maximize disposable income into savings.

Millennials workers need to ensure they invest appropriately, says Fidelity.

“Millennials have the benefit of time on their side, so staying invested and making steady contributions–even through market volatility and recession fears–can help your retirement savings grow long-term and recover from any downturns,” according to Fidelity.

Millennials are encouraged to ask themselves how they can improve their asset allocation and what tax advantaged accounts they should be investing in.

Fidelity’s research was collected through a national online survey of 3,569 working households earning at least $25,000 annually with respondents [and spouses, if married] age 25 to 75, from August 22 through September 26, 2022. All respondents expect to retire at some point and have already started saving for retirement. Data collection was completed by Versta Research using NORC’s probability-based nationally representative online panel.

The responses were benchmarked and weighted against data from the American Community Survey and Current Population Survey conducted by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. Versta Research and NORC are independent research firms not affiliated with Fidelity Investments. Fidelity Investments was not identified as the survey sponsor.