(RoyalPatriot.com )- A recent assessment found that the volatile economy has impacted retirement savings severely, with over half of US households falling short of the savings trajectory necessary for retirement.
Fidelity Investments’ most recent Retirement Savings Assessment found that the US retirement score dropped to 78 as of 2023, a five-point drop from the all-time high of 83 in 2020. The typical household’s preparation for retirement is now ranked as “fair” rather than “good.”
In a press release on Tuesday, Fidelity Investments said the current decline in retirement preparedness is driven by Americans “saving less” while “investing more conservatively.” These two factors are “natural reactions” to the “challenging financial environment,” Fidelity Investments explained.
According to Fidelity Investments, about 52 percent of those responding to the assessment will likely need to make “modest to significant adjustments” after they retire if they do not “take action” now to make up for the shortfall in their savings. Another 34 percent of respondents will have to make “significant adjustments.”
The Americans most prepared for retirement are those born between 1946 and 1964, or the Baby Boomer generation.
However, those born between 1965 and 1980 (AKA Gen X) and those born between 1981 and 1996 (AKA Millennials) both saw declines in their retirement preparedness, the assessment found.
According to Rita Assaf, the Vice President of Retirement for Fidelity Investments, when navigating economic uncertainty, many Americans “may consider pulling back on saving for the future.” Assaf said for long-term investing, it is critical to stay focused on individual goals by “having a plan in place.”
According to Fidelity Investments, the current tumult in the stock market has caused retirement accounts to decline.
In the fourth quarter of 2022, the average IRA balance was $104,000, a 23 percent year-over-year decline from the $135,600 average during the fourth quarter of 2021.
Likewise, the average 401(k) balance in the fourth quarter of 2022 was $103,900, roughly a 20 percent decline from the $130,700 average balance in the fourth quarter of 2021.