America’s Retirement Readiness ‘Score’ Improves, But …

401k, retirement, Fidelity, savings

Unfortunately, it's graded on a curve.

American savers have steadily improved their retirement preparedness, with America’s retirement score at an all-time high of 80.

It means the typical saver is on target to have 80 percent of the estimated income estimates they will need to cover retirement costs, according to Fidelity Investments.

It’s a significant improvement from when the study was first conducted in 2005 when the score was 62, according to the Boston-based firm.

However, even with this improvement, the study reveals half of those surveyed are at risk of not being able to fully cover essential expenses in retirement.

Millennials appear to be making the greatest strides in getting to the “green zone,” meaning most savers will be on track to cover essential expenses in retirement.

“Millennials are clearly putting money aside for retirement and taking more control of their personal situations to ensure a financially-secure future,” Ken Hevert, senior vice president of Retirement at Fidelity, said in a statement. “While younger generations typically don’t have jobs with access to pensions as a source of guaranteed retirement income, there are many actions that can be taken to improve retirement readiness, including saving more, managing debt and making smart investment decisions.”

What’s driving the behavior?

Fidelity also points to the issue of health care expenses in retirement planning, noting that the growing popularity of tax-advantaged health savings accounts (HSA) has become one solution “poised to meet this need, for those who have it available as an option.”

Respondents who report having HSAs tend to have higher Retirement Scores: households with an HSA have a score of 84; those without have a score of 79.

“Although this does not provide definitive proof of a causal relationship between having an HSA and one’s Retirement Score, the evidence strongly suggests taking advantage of this savings vehicle, if you have access to one, is good for your overall financial position and indicative of good savings habits, regardless of income level,” the company concludes.

Exit mobile version