American workers are on track to replace 57% of their income in retirement, up from 56% last fall, according to a news release about Fidelity’s Retirement Index for Spring 2006.
The index found that while the average American household is in for more than a 40% pay cut, about half of them (52%) have taken some action in the last six months to brace for this. The most popular steps, according to the announcement, were:
- increasing contributions to employee retirement savings accounts
- adjusting retirement portfolios
- consulting a financial advisor
- opening retirement saving accounts.
The respondents seem to be more aware that retirement will cut their incomes by more than 40%, with 83% of respondents to the survey saying they are not saving enough for retirement, up from 78% in June of last year.
Even if people are more aware that they will be living on less after retirement, 76% of the respondents say that spiking fuel prices have affected their ability save for retirement. Of these respondents, almost half (45%) say that fuel prices have caused them to reduce retirement savings and one in four (25%) say that high prices have delayed plans to start saving.
Aside from today’s rising fuel prices, workers are also concerned about the rising cost of health care – the second largest retirement expense. Survey respondents estimated out-of-pocket health care costs for a 65-year old couple today at a median of $80,000, which is 60% lower than the costs Fidelity estimates.
An estimated 45% of workers say it is the individual’s responsibility to ensure health care is affordable while 44% think the burden should fall with the government and 11% think employers should provide this access, according to the news release.
Respondents are split on who is responsible for making sure medical insurance after retirement is affordable. Almost half (46%) of respondents said they would work at least part time in retirement to offset the cost of out-of-pocket health care costs, while nearly one-third (31%) planned to retire later in order to continue receiving workplace health benefits.
According to the news release, the index looks at overall retirement readiness of American households based on data such as workplace and individual savings, projected Social Security and pension benefits, and anticipated retirement horizons, and aims to predict whether the average household will have more, less or the same amount to live on in retirement compared to pre-retirement.