More Than Half of US Households Expect to Struggle to Meet Basic Retirement Expenses: Fidelity Survey

Ryan Morgan
By Ryan Morgan
March 23, 2023US News
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More Than Half of US Households Expect to Struggle to Meet Basic Retirement Expenses: Fidelity Survey
Stock photo of social security cards. (Lane V. Erickson/Shutterstock)

According to a new assessment by Fidelity Investments, more than half of American households would fall short of what it takes to cover their basic expenses in retirement.

Fidelity Investments released its 2023 Retirement Savings Assessment (pdf) on Tuesday, in which the firm surveyed more than 3,500 people, finding just 48 percent of U.S. households expect that they will be able to cover at least their essential expenses in retirement. The overall number of U.S. households likely to be able to meet their retirement expenses has fallen by six percent since 2020.

According to the Fidelity Investments survey, 32 percent of U.S. households believe they are “on target” to cover all basic retirement expenses and discretionary costs. The firm rated another 16 percent of households as “good,” indicating they could likely cover basic expenses but few discretionary ones. Fidelity Investments rated 18 percent of households as “fair,” meaning “modest adjustments to retirement lifestyle” are likely needed. Thirty-four percent of households were labeled as “needs attention,” meaning “significant adjustments to retirement lifestyle” will likely be required.

The households that considered themselves “on target” or in “good” shape for their retirement were 37 percent and 17 percent, respectively, in 2020. The percentage of households in Fidelity’s “fair” categorization held steady since 2020, while those who considered themselves to be in the “needs attention” category rose by six points from 28 percent in 2020.

Fidelity assessed America’s retirement score to be 78 in 2023. The investment firm estimates that the average household could cover 78 percent of the income they need to cover their retirement costs. America’s retirement score was 83 in 2020, an all-time high for the survey Fidelity first conducted in 2006.

Financial Uncertainty Impacting Retirements

Fidelity’s reported decline in retirement preparedness comes as Americans have been dealing with financial uncertainty in recent years.

“American savers continue to navigate through uncertainty, and as a result, may consider pulling back on saving for the future,” said Rita Assaf, vice president of retirement at Fidelity Investments. “When it comes to long-term investing, staying focused on your individual goals is critical. Having a plan in place is one solid way to help weather any storm, as we’ve seen the last few years and weeks with the pandemic, inflation, and market volatility.”

Fidelity Investments found that, on average, households have increased their total savings since 2020. However, the Millenials and Baby Boomers decreased the overall rate at which they saved by 0.2 percent and 2.2 percent, respectively. Gen-X respondents increased their saving rate by 1.4 percent since 2020, though their median incomes remained flat at about $120,000 per year. In total, 31 percent of respondents reported they were saving less.

Inflation was an issue on the minds of most survey respondents. Eighty-two percent of respondents said they are concerned inflation will hurt their finances, including about 85 percent of Baby Boomers and Gen-Xers approaching or entering retirement. Fidelity survey respondents gave those assessments after inflation hit a 40-year high of 9.1 percent in July 2022.

Fifty-seven percent of respondents said they expect the effects of high inflation to continue to impact them over the next three years, while 35 percent predicted high inflation could last even longer.

Eighty-five percent of respondents indicated they had taken measures to counteract inflation’s impact on their retirement plans, such as cutting discretionary and some essential expenses and delaying large purchases.

Despite concerns over inflation, just 8 percent of respondents indicated they feel a need to postpone their planned retirement dates.

Based on its current retirement score for America, Fidelity Investments has advised people to save at least 15 percent of their pre-tax income. Fidelity also called on people to reassess their investment strategies and move away from expressly conservative or expressly aggressive investment plans and towards “age-appropriate” allocations in investment portfolios. Fidelity Investments also advised people to wait longer, if possible, before retiring.

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