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Published by Fidelity Interactive Content Services

Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.

Millennials may not be able to afford retirement essentials

  • By Melanie Hicken,
  • CNNMoney.com
  • – 12/04/2013
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While many Americans are falling short on savings, millennials are most at risk of being unable to afford essential retirement expenses -- such as food, shelter and medical care, according to a Fidelity Investments survey released Wednesday.

Fidelity found that about 55% of people surveyed are at risk of being unable to cover these expenses.

Typical baby boomers (born 1946 to 1964) are on track to reach 81% of their retirement income needs, according to the survey. Generation X-ers (born 1965 to 1977) are expected to reach only 71%, and Generation Y or millennials (born 1978-1988) have the largest projected income gap at 62%.

The retirement provider asked over 2,000 Americans a range of questions, from their health to retirement saving habits. It analyzed a variety of factors, including current income, savings rates, home equity and projected Social Security and pension benefits to predict how much money people will need in retirement and whether they are on track to meet that goal.

Across generations, many people simply aren't saving enough, Fidelity found, with 40% of those surveyed saving less than 6% of their salaries -- far below the 10 to 15% recommended by financial planners. For millennials, that percentage jumps to 51%.

Also driving the disparity: Boomers are more likely to have some sort of pension benefit and plan to work longer, according to John Sweeney, Fidelity's executive vice president of retirement and investing strategies.

Boomers had a median desired retirement age of 66, whereas millennials wanted to retire two years earlier than that. Yet today's young people could live well into their 90s and will have to wait until they are 67 in order to claim full Social Security benefits.

"Some of the older folks had more realistic expectations," he said.

Many young people are also playing it too safe with investments, he said. Of millennials surveyed, 50% said they had less than half of their investments in stocks. In contrast, common rules of thumb recommend that 30-year-olds should have up to 90% of their portfolio in stocks since they have decades of savings ahead of them.

It's not all bad news though. Sweeney noted that while they have the farthest to go, millennials also have the most time to catch up. Here are some key ways savers of all ages can boost their savings:

Up your savings rate: For young people especially, the most effective move is to sock away more money each month, since money saved when young enjoys decades of compound returns.

Review your asset mix: While you can't control the markets, you can make sure your investment strategy is age appropriate. Fixing a portfolio that is either too risky or too conservative could significantly help retirement readiness, Fidelity found.

Retire later: Working longer gives you more time to save, boosts your Social Security benefits and lets you use your retirement savings over a shorter time period.

More than 2,200 households earning at least $20,000 annually took part in the online survey, which used a nationally-representative panel of respondents.

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Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.
fidelity-fbs-iconThese links are provided by Fidelity Brokerage Services LLC ("FBS") for educational and informational purposes only. FBS is responsible for the information contained in the links. FICS and FBS are seperate but affiliated companies and FICS is not involved in the preparation or selection of these links, nor does it explicitly or implicitly endorse or approve information contained in the links.
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