Americans are finally doing something right when it comes to saving for retirement.
Though seemingly countless reports detail Americans’ dismal hopes for financially sound golden years, recent data show we’re actually getting better at prepping for retirement.
More households are on track to cover essential expenses in retirement than in 2013, according to a Fidelity report out Thursday that analyzed retirement preparedness based on survey responses from 4,650 people. Fidelity issued each household a score based on how well they’ll be able to cover basic expenses — food, shelter, health care — in retirement. The number of households that scored an 81 or above, meaning they can cover at least the basics, increased to 45, up from 38 in 2013, the last year Fidelity conducted the study.
At the same time, the number of households that need to make adjustments to retirement plans in order to have enough money saved decreased to 32 from 43 in 2013.
The results are an encouraging sign in a financial landscape that often points out how ill-equipped Americans are to support themselves into old age. An improving economy and recognition of the burden of retirement planning on the individual are both likely leading to an increased savings rate, says John Sweeney, executive vice president of retirement and investment strategies at Fidelity.
“People are becoming more aware of the fact that they need to take control of their own retirement, and they need to save more,” he says.
Americans’ median savings rate increased to 8.5 in 2015 from 7.3 in 2013, according to Fidelity. And Millennials, defined by Fidelity as 25- to 34-year-olds, made the most improvement, increasing their savings rate from 5.8 to 7.5. The data also show Americans are making smarter investments — 62 had age-appropriate asset allocation in 2015, compared with 56 two years earlier.
While the numbers show improvement, Americans’ median preparedness score, at 76, is still below the “good” range, meaning many people still need to make adjustments to get on track. And nearly a third are in the “I need serious help” boat.
While not all Americans are necessarily getting better at preparing for retirement, they do seem to be more aware of its financial implications, says Len Hayduchok, a certified financial planner and president of Dedicated Senior Advisors in Hamilton, N.J. He attributes the awareness to factors such as longer life expectancy and even shows likeShark Tank that perhaps help increase interest in finances generally.
He says more customers have started coming to his firm for the planning services over the financial products.
“I see it in the quality of the questions people ask me,” Hayduchok says. “They’re digging into more details.” He adds that he’s also noticed clients with more diversified portfolios.
The best thing to do to improve your standing in retirement depends on how old you are, Sweeney says. Young adults should save more and take advantage of compound interest over time — Fidelity recommends setting aside 15 of your income in savings — while Boomers should consider retiring later, he says. Retiring later will give you more time to build savings and ensure you’re able to take advantage of full Social Security benefits, which don’t kick in until ages 65-67 depending on what year you were born. You won’t receive as much money if you retire earlier than that.