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America's collective readiness for retirement is improving, according to Fidelity's latest Retirement Savings Assessment study. The study distills America's retirement readiness into a single score representing the percentage of estimated retirement income that the average saver will require.

According to the current study, America's combined retirement score is 80 – meaning that the average American saver is on track to have 80% of the income required to cover all retirement costs. While 80 falls at the upper end of the fair range in Fidelity's guide, it's a great improvement over the original survey score of 62 in 2005.

Unfortunately, assuming that 80% of retirement income covers necessary expenses, the results indicate that half of survey respondents are at risk of not having enough income to cover these expenses in retirement – and the data indicates movement toward the extremes. While 32% of households scored above 95, 28% of households scored less than 65. Both values increased from the 2016 survey, at the expense of the fair category (65-80) and the good category (81-95).

The average score for baby boomers (those born in 1946-1964) was 86, the highest of all generations in the survey – as it should be, since most boomers are nearing retirement or already retired. They are socking away just under 10% of their salaries for retirement, above the average savings rate of 8.8% but well below Fidelity's recommended savings rate of 15%. At this point, the most impactful step for Boomers is to work longer and delay Social Security benefits, but taking advantage of catch-up contributions to 401(k)/IRA accounts can help.

On the other end of the generational scale, millennials have the second-best average retirement score at 78. Millennials (born 1982-2000) save only 7.5% of their salaries on average, but a soaring stock market has helped them overtake generation X (born 1965-1981) in readiness – even with relatively conservative investing habits. They could improve by adopting more aggressive investing habits while they have more time to recover from the inevitable corrections.

Generation X averages 77 in retirement readiness, as they did in the 2016 survey. With an 8.6% savings rate, generation X-ers will need to increase savings rates or consider working longer to compensate, since they don't have the luxury of time that millennials have.

Are you in the half of Americans that aren't on track to meet essential expenses in retirement? Fidelity suggests three steps to improve and projects how much of an impact these changes will have on an average retirement readiness score.

1.Review Investments

Investments that are either too conservative or risky for your age can reduce your likely retirement income. Fidelity estimates that an age-appropriate asset allocation would increase the average readiness score from 80 to 82.

2.Increase Savings

At Fidelity's recommended savings rate of 15% with employer contributions included, the average retirement score increases from 80 to 90 – but every little bit of savings will help.

3.Delaying Retirement

The median retirement age of respondents was 65, below the full retirement age (FRA) of 66-67 depending on birth year. By simply delaying retirement from age 65 until FRA, average readiness increases from 80 to 91 – and by working beyond FRA, you can increase your monthly Social Security benefits by up to 30%.

These are obvious points – if you save more and work longer, you should have more income at retirement and should need less income when you do retire. However, obvious is not the same as simple. Fidelity is noting our progress in retirement readiness and reminding us of the necessary steps to close the gap. It's up to us to actually take those steps.

Regardless of where you plan to retire, the number one factor in ensuring that you can retire on your terms is your 401(k). Make sure that your 401(k) is maximizing its potential with this free analysis that checks your fees, fund mix, and other factors to help you hit your retirement goals.


Photo ©iStockphoto.com/amriphoto

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