Disappearing pensions, personal contributions to 401(k)s, a tough economy and the lasting impact of the financial meltdown – the varied elements of retirement planning weave a web of challenges for those considering leaving the regular workweek for what was once considered a time to wind down a bit and step up long-delayed, personal pursuits.
About 55 percent of Americans, however, are not financially prepared for retirement, according to the findings of the “2013 Retirement Savings Assessment” by Fidelity Investments released Dec. 4. Baby boomers are somewhat more financially prepared to leave the workforce, compared to the track being followed by Gen Xers born between 1965 and 1977 and Gen Yers born between 1978 and 1988.
“More than half of Americans risk falling behind on the road to retirement,” said Lauren Brouhard, senior vice president for retirement for Fidelity Investments.
Fidelity surveyed 2,200 households across the nation, made up of customers and noncustomers, on financial-planning topics such as savings, income, home equity and pensions in an effort to track and understand retirement-planning trends.
“We estimated what percent of their retirement expenses they’re on track to cover,” said Brouhard. The information led to a score, called a Retirement Preparedness Measure, of up to 100 percent, which estimates what percent of retirement expenses a household would be able to cover, even in a down market.
“It varies a lot by generation. The baby boomers, which is the generation that is entering or on the cusp of entering retirement in the next five to 10 years, they had a score of 81,” said Brouhard. Baby boomers were born between 1946 and 1964.
“We were pleasantly surprised at the number of baby boomers on track,” said Brouhard. “The big differentiator for the baby boomer generation is that many of them still have the benefit of a pension.”
Changing workplace structures, heavily influenced by the stresses of the economy, are impacting the retirement readiness of the Gen X and Gen Y generations.
“The younger generations – people in their 20s, 30s or even 40s – are unlikely to have the safety net of a pension,” said Brouhard. “So it’s going to be even more important that they start saving early.”
A good starting point to approximate what’s comfortable is that people will need 85 percent of their pre-retirement income to live on in retirement, but that varies widely by lifestyle and goals, said Brouhard.