“For those with a longer time horizon, it may be comforting to know that putting a plan in place may be easier than you think, and will give you the perspective to focus on what you need to do to achieve your goals,” said Ridolfi. “If you are closer to retirement, the good news is, it’s never too late to start planning for your future, regardless of age or income. The study findings clearly show that creating a plan for retirement can lead to a greater sense of confidence and control and ultimately give people a better feeling about where they stand at any age.”
Extra Credit: Consider These Important Retirement Guidelines
To create a strong and achievable plan, it can be helpful to understand where you need to go, and when it comes to retirement, the study uncovers several areas of opportunity when it comes to understanding important retirement rules of thumb. Among them:
- How much to save for retirement: Only 25% of respondents accurately indicated that financial professionals recommend having 10-12 times your last full year of working income by the time you reach retirement. Half of all respondents thought the figure would be only 5 times or less.
- How much to withdraw in retirement: 28% said that financial professionals would recommend a withdrawal rate of 10 to 15% of retirement savings every year, a withdrawal rate that would use up one’s retirement savings quickly. Withdrawing that amount would be far above Fidelity’s suggested rate of 4 to 5 percent annually.
- Market Returns: Almost three-quarters (72%) of respondents believe the stock market3 has seen negative returns more frequently than positive ones over the past 35 years. It may come as a pleasant surprise for people to learn that the stock market has had a positive annual return for 26 out of the past 35 years.
- The cost of out-of-pocket health care expenses: Most respondents underestimate the cost of out-of-pocket health care for a couple in retirement, with 37% guessing between $50,000-100,000. In fact, for a couple retiring at 65, the actual average cost throughout
their retirement is three times higher, at $295,0004.
- Full retirement age for Social Security: Although you can start receiving Social Security retirement benefits as early as age 62, you have to wait a few more years before you reach Full Retirement Age (FRA). Claiming Social Security benefits any time before you reach FRA can lock in a permanent reduction in monthly income. Doing some research on this may be helpful, as only 17% correctly identified their Full Retirement Age (FRA) for Social Security, including 44% of Gen X-ers, who underestimated their FRA of 67.
- The impact of divorce on Social Security: There’s good news on this front. While 63% of respondents think a former spouse has the ability to reduce their monthly benefits, the truth is, one’s Social Security benefit is not reduced if an ex-spouse claims some of their Social Security benefits.
Looking to Get Started?
One of the most helpful and motivating pieces of information people can get is an understanding of what they’re tracking to vs. what they might need to retire. To help investors get this perspective, Fidelity created the Fidelity Retirement Score, which reflects the percentage an individual or household is anticipated to have saved as compared to the income Fidelity estimates they may need in retirement. Fidelity customers and those who sign up for guest access can get their score in the Planning and Guidance Center and can use a host of planning tools to create and refine a plan for their retirement over time. A high-level version of the score is also available to everyone at www.fidelity.com/score by answering just six short questions. Both allow savers to easily model changes to see how that may impact their score and view steps for improving retirement preparedness based on their score. In addition, Fidelity offers a variety of other resources:
- Educational Fidelity Viewpoints® articles, including “Retirement savings: Who's on target?,” “The three A’s of successful saving” and a Retirement Roadmap Special edition devoted exclusively to retirement planning. For those who want to work on financial literacy, there’s a series of four quick, easy lessons designed to boost people’s confidence in making informed investing decisions.
- Seminars and online learning modules to help learn about key retirement issues and how to prepare for them.
- Teams at Fidelity’s more than 200 Investor Centers nationwide are meeting virtually with clients to plan for retirement and other aspects of their financial futures. You may also call 1-800- FIDELITY (1-800-343-3548) for a consultation with an investment professional.
For a detailed look at the Fidelity Investments’® State of Retirement Planning Study, go here.
About the Fidelity Investments State of Retirement Planning Study
This study presents the findings of a national online survey, consisting of 1,204 adult financial decision makers who were not retired. Respondents had at least one investment account and those over age 34 had at least $100,000 investable assets. The generations are defined as: Baby Boomers (born 1946-64), Gen X (born 1965-80), Millennials (born 1981-96) and Gen Z (born 1997-2012). Interviewing for this CARAVAN® Survey was conducted February 5-12, 2021 by Engine Insights, which is not affiliated with Fidelity Investments. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study.
About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $10.2 trillion, including discretionary assets of $3.9 trillion as of February 28, 2021, we focus on meeting the unique needs of a diverse set of customers: helping more than 35 million people invest their own life savings, 22,000 businesses manage employee benefit programs, as well as providing more than 13,500 institutions with investment and technology solutions to invest their own clients’ money. Privately held for more than 70 years, Fidelity employs more than 47,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit www.fidelity.com/about-fidelity/our-company.