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3 ways to help boost your retirement savings

Key takeaways

  • Inflation and a rocky stock market may be wearing on Americans' saving stamina. America's retirement score dropped slightly from the last reading in 2020, according to recent research from Fidelity.
  • There are steps investors can take to boost their personal retirement scores, no matter how close or far away retirement may be.
  • 3 ways to help supercharge your savings: Saving 15% of your income (including any match from your employer), reevaluating your retirement plan, and investing in an age-appropriate mix of investments that consider your risk tolerance and time horizon.

Many people find the word retirement to be stress-inducing. It’s easy to see why: Saving a significant amount of money consistently for decades through everything that life throws at you is hard—and sometimes even impossible. Add to that high inflation and a rocky stock market and it’s no wonder people are saving a little less for retirement these days and investing more conservatively.

Every 2 years, Fidelity surveys thousands of Americans who have already started saving for retirement. The results are calculated to give the country a score that shows generally how prepared Americans may be in retirement. In 2023, America’s retirement score is 78,1 down from 83 in 2020. That means that the median person who is saving for retirement is on track to cover 78% of their expenses in retirement.2

On a generational basis, baby boomers landed a score of 87. Gen X scored 79 and millennials 72. How do you compare? Find out with the Fidelity Retirement Score.

The drop in Americans’ retirement preparedness is not surprising given global economic uncertainties, rising prices, and the recent bear market. In this environment, saving anything for retirement should be celebrated and considered a win. Still, there are steps you can take, no matter your age or situation, to improve your readiness to retire on your terms when the time is right.

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There are 4 categories on Fidelity's retirement preparedness scale. They measure your ability to cover estimated retirement expenses particularly in a down market.3

Dark green: Very good (96 or over). On target to cover 96% or more of total estimated expenses. Green: Good (81–95). On target to cover essential expenses, but not discretionary expenses like travel, entertainment, etc. Yellow: Fair (65–80). Not on target to cover all essential retirement expenses without modest adjustments to planned lifestyle. Red: Needs attention (less than 65). Not on target to cover all essential retirement expenses without significant adjustments to planned lifestyle.

If you have 5, 10, 20, or 30 years until retirement, you have plenty of time to ride out pullbacks in the market. Saving and investing consistently during down markets can actually help supercharge retirement savings once the market rebounds. If you’re closer to retirement, working just 1 or 2 years longer than planned—if it’s a possibility—can have a significant impact on your retirement savings because that’s one extra year your savings and investments can potentially grow, and one less year you’ll need to withdraw from your savings.

Looking for ways to catch up on your retirement savings? Here are the 3 biggest steps you can take.

Fidelity's Retirement Savings Assessment found that the median American who has started saving for retirement has a retirement score of 78. That means they are on track to 78% of their expenses in retirement.

3 tips to help prepare for retirement

1. Try to save as much as you can. Your savings rate is the amount of your income that you're able to save, stated as a percentage. If you earn $100,000 and save $10,000 per year—your savings rate would be 10%.

The median savings rate for all ages and incomes was 10% in Fidelity's Retirement Savings Assessment (RSA) survey. That's not too far from Fidelity's retirement savings guideline which suggests saving 15% of your income for retirement—including any match you may get from your employer.4

Boosting America's savings rate to 15% could bump up the national average 10 points to 88, solidly in the green.

How can you get to 15%? Small steps can help get you there.

Make your savings automatic. If you're contributing to a workplace savings plan, your contributions may be made by payroll deduction so the money you contribute never hits your bank account. Since you don't see it come in or go out, you may not think about it or miss it too much.

If you're contributing to your own retirement account, like an IRA, you can make those savings automatic as well by setting up direct deposit or establishing recurring transfers from your bank.

Read Viewpoints on Help your money grow with automation

Look for spending trade-offs. Being aware of your spending and the trade-offs between pleasure now and pleasure later can help identify times when a potential purchase isn’t worth it. A trade-off could also be called an opportunity cost—the choice you don’t make can be a missed opportunity to potentially make more money. Sometimes spending may be worth it but other times, that could be a few extra dollars you could save and invest for your future.

A mindful approach can help you work your way up to saving 15% of your income annually. You could even aim to increase your contribution rate by 1% each year until you get there. 1% more may be less cash to give up than you fear—and even small increases in savings can make a big difference.

For a 35-year old person who earns $60,000 a year, saving 1% of their annual income on a pre-tax basis comes out to less than $12 per week but they could have $85,492 by age 67. For a person who is 55 and earns $80,000 annually, 1% is less than $16 a week and they could have $16,779 by age 67.
This information is intended to be educational and is not tailored to the investment needs of any specific investor.

*Approximation based on a 1% increase in contribution rate. Continued employment from current age to retirement age, 67. We assume you are exactly your current age (in whole number of years) and will retire on your birthday at your retirement age. Number of years of savings equals retirement age minus current age. Nominal investment growth rate is assumed to be 5.5%. Hypothetical nominal salary growth rate is assumed to be 4% (2.5% inflation + 1.5% real salary growth rate). All accumulated retirement savings amounts are shown in future (nominal) dollars. This assumes no loans or withdrawals are taken throughout the current age to retirement age.

Your own plan account may earn more or less than this example and income taxes will be due when you withdraw from your account. Investing in this manner does not ensure a profit or guarantee against a loss in declining markets.

Investing involves risk, including the risk of loss.

2. Work a little longer Tacking on a few extra years to the tail end of your career may be a great way to improve your retirement prospects. But it's often not that easy. Health issues may prevent people from working as long as they would like and ageism in the workplace can make it difficult and discouraging for experienced workers. That being said, if you feel behind on your savings and have the opportunity to continue working, it could give your savings a significant boost.

The people surveyed by Fidelity reported that they plan to retire, on average, around age 65. For the median American represented by the national RSA score, retiring at their full Social Security retirement benefits age (around age 67) could improve the score by 17 points.

Waiting to claim Social Security at age 70 instead of age 65 is another strong step—it could increase your payments by 43%.5

Read Viewpoints on Should you take Social Security at 62?

3. Consider an age-appropriate investment mix Most people who are saving for retirement are invested appropriately for their age,6 goals, and time frame. Still, making some adjustments to an investment mix has the potential to improve your readiness for retirement.

In general, we believe younger people should be invested in stocks for long-term growth potential, while people closer to retirement are better off in a more balanced stock/bond portfolio. By adjusting portfolios appearing to be either too conservative (not enough stocks) or too aggressive (too heavy in stocks) with age-appropriate mixes, the national median score improves 2 points.

To learn more about picking an investment mix that could help you hit your retirement savings goals, read Viewpoints: Investing ideas for your IRA

Taken together, saving more, working until full retirement age or beyond, and tweaking the investment mix brings America's retirement score up to 108—enough to cover 100% of estimated expenses in retirement with more to spare.

Opportunities for improvement in retirement savings by age

Here's where each generation stands in their retirement planning and how they can improve their savings.

The median retirement savings balances by generation. Millennials have a median balance of $45,000, Gen X has a median balance of $162,500, and baby boomers have a median balance of $225,000. All 3 generations can get close to 100 or beyond by contributing at least 15%, investing appropriately for their age, and waiting for full retirement age to claim Social Security.
Source: Fidelity Investments Retirement Savings Assessment

How to plan for retirement by age

Baby boomers, the generation born between 1946 and 1964, have a median retirement score of 87 in 2023.

As boomers get closer to retirement, being clear on your goals and having a plan in place can make a big difference in ensuring your savings last.

Key questions to ask yourself:

Close to retirement?

Generation X, the generation born between 1965 and 1980, have a median retirement score of 79 in 2023.

People in Gen X are in their prime earning years and may still have a long time before retirement to save and invest. With years to stay invested, there's plenty of time for your investments to potentially grow so funneling extra money toward retirement now can make good sense. People over age 50 can even take advantage of catch-up contributions to boost savings.

Key questions to ask yourself:

  • How much income will I need in retirement?
  • How can I save more?
  • Do I have the right mix of investments?

Read Viewpoints on How to max out your retirement savings and How much do I need to retire?

Millennials, the generation born between 1981 and 1996, have a retirement score of 72 in 2023.

Millennials have time on their side so staying invested and making steady contributions can help your retirement savings grow long term and likely recover from any downturns.

Key questions to ask yourself:

  • How can I improve my investment mix?
  • What tax-advantaged accounts should I be investing in? Examples of tax-advantaged accounts include health savings accounts (HSAs), workplace savings plans like 401(k)s, and IRAs.

Read Viewpoints on How to start investing and 3 reasons to contribute to an IRA

Keep up the great work!

The road to retirement is a long one with unexpected twists and turns. Don't despair if you can't save 15% of your income right now. Save what you can consistently while keeping the rest of your financial life in order. Try to invest for growth potential even when things look bleakest in the stock market. Trust that doing your best at these things now can pay off in the future. It's not always easy but it will be worth it.

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About the Fidelity Investments Retirement Savings Assessment: The findings in this study are the culmination of a year-long research project that analyzed the overall retirement readiness of American households based on data such as workplace and individual savings accounts, Social Security benefits, pension benefits, inheritances, home equity and business ownership. The analysis for working Americans projects the retirement income for the typical household, compared to projected income need, and models the estimated effect of specific steps to help improve preparedness based on the anticipated length of retirement. Data for the Fidelity Investments Retirement Savings Assessment were collected through a national online survey of 3,569 working households earning at least $25,000 annually with respondents [and spouses, if married] age 25 to 75, from August 22 through September 26, 2022. All respondents expect to retire at some point and have already started saving for retirement. Data collection was completed by Versta Research using NORC's probability-based nationally representative online panel. The responses were benchmarked and weighted against data from the American Community Survey and Current Population Survey conducted by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. Versta Research and NORC are independent research firms not affiliated with Fidelity Investments. Fidelity Investments was not identified as the survey sponsor. Fidelity's Retirement Score is calculated through Fidelity's proprietary financial planning engine. Of note, Fidelity continually enhances and evolves the retirement readiness methodology, guidance tools and product offerings. This year's survey processing includes enhancements including, but not limited to, demographic weighting, retirement income projections and social security estimates. To enable a direct comparison, the previously reported Retirement Score results were recalculated using the enhanced methodology. This analysis is for educational purposes and does not reflect actual investment results. An investor's actual account balance and ability to withdraw assets during retirement at any point in the future will be determined by the contributions that have been made, any plan or account activity, and any investment gains or losses that may occur. For more information on Fidelity Investments® Retirement Savings Assessment, an executive summary can be found on 1. This number represents the median Retirement Score derived from the Retirement Savings Assessment. 2. Retirement Expenses are estimated by Fidelity using replacement rates derived from Consumer Expenditure Survey (CEX). The replacement rate estimation is a function of total pre-retirement income, user selected lifestyle choices (default is average), and effective tax rate corresponding to pre-retirement income. 80% of total estimated expenses are considered essential in nature. 3. Fidelity uses an underperforming market for planning projections based on Monte Carlo simulations and its proprietary financial planning engine. Underperforming market conditions mean that in 9 out of 10 market scenarios the hypothetical portfolio performed at least as well, while 1 out of 10 times the hypothetical portfolio failed to perform as well. Using underperforming markets as a planning measure leads to conservative results. Using a lower confidence level would improve results, but also increase the risk that investors would fall short of projections. 4. Fidelity's suggested total pre-tax savings goal of 15% of annual income (including employer contributions) is based on our research, which indicates that most people would need to contribute this amount from an assumed starting age of 25 through an assumed retirement age of 67 to potentially support a replacement annual income rate equal to 45% of preretirement annual income (assuming no pension income) through age 93. The income replacement target is based on Consumer Expenditure Survey (BLS), Statistics of Income Tax Stats, IRS tax brackets, and Social Security Benefit Calculators. The 45% income replacement target (excluding Social Security and assuming no pension income) from retirement savings was found to be fairly consistent across a salary range of $50,000-$300,000; therefore the savings rate suggestions may have limited applicability if your income is outside that range. Individuals may need to save more or less than 15% depending on retirement age, desired retirement lifestyle, assets saved to date, and other factors. See footnote 3 for investment growth assumptions. 5. The basis for this increase: based on Social Security Administration's rules, claiming social security before full retirement age (FRA) results reduction. Delaying social security after FRA increases one's benefits by around eight percent per year of delaying until age 70. Assume FRA of 67. 6. Age-appropriate asset allocation involves investing in a mix of stocks and fixed-income investments to align with one's risk-tolerance, age and time horizon. “Appropriate” refers to what Fidelity considers to be an appropriate mix, derived from data reported in the Retirement Savings Assessment about an individual's equity allocation distribution that is placed into 4 categories, based on that person's age. Those categories are “On track”: within 25 percent on target date equity allocation; “Aggressive”: an equity percentage more than 25 percent above the age-appropriate target equity; “Conservative”: an equity percentage less than 25 percent below the age-appropriate equity target; as well as a category for assets held in a Target Date Fund. The participant's current age and equity holdings are compared with an example table containing age-based equity holding percentages based on an equity glide path. The Fidelity Equity Glide Path is an example we use for this measure and is a range of equity allocations that may be generally appropriate for many investors saving for retirement and planning to retire around ages 65 to 67. It is designed to become more conservative as participants approach retirement and beyond. The glide path begins with 90% equity holdings within a retirement portfolio at age 25 continuing down to 19% equity holdings at age 93. Equities are defined as domestic equity, international equity, company stock, and the equity option of blended investment options.

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