Despite improvements in the economy, many working Americans are falling behind on retirement preparedness, with 55% in fair or poor condition when it comes to being able to completely cover estimated essential living expenses in retirement.

Fidelity Investments’ retirement preparedness measure (RPM) shows that working Americans fall into four categories on the retirement preparedness spectrum.

The categories are linked to a numeric range (the higher the better), based on an individual’s ability to cover estimated retirement expenses, even in a down market.

  • Dark green: Very good or better (95 or over) These households are on track to cover 95% or more of total estimated expenses, even in a down market; 33% of those surveyed were dark green.
  • Green: Good (80–95) On track to cover at least essential expenses but not discretionary expenses such as travel or entertainment; 12% of those surveyed were green.
  • Yellow: Fair (65–80) Not on track to sufficiently cover all essential retirement expenses, with modest adjustments to their planned lifestyle likely; 14% of those surveyed were yellow.
  • Red: Poor (less than 65) Not on track to sufficiently cover all essential retirement expenses, with significant adjustments to their planned lifestyle likely; 41% of those surveyed were red.

The median score indicates that working Americans are on track to meet just 74% of their estimated retirement expense goals and face a 26% income gap, forcing them to make spending cuts in retirement that may diminish their quality of life—especially if the market experiences a severe downturn.

Part of the problem is that many Americans save too little—in fact, the survey indicates that 40% of respondents are saving less than 6% of their salaries today. Among generation Y, that percentage jumps to 51%, versus 43% for gen X and 34% for baby boomers.

“This savings shortfall is one of the biggest reasons the median RPM is in the yellow, although there are several others, too,” said John Sweeney, executive vice-president of retirement and investment strategies at Fidelity. “When you factor in the expectations many have of an early retirement, along with increasing longevity and sometimes overly conservative asset mixes for investments, you can see why many people are not as prepared as they need to be to cover their expected expenses in retirement.”

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Copyright © 2019 Transcontinental Media G.P. Originally published on

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