New research from Financial Finesse paints a muddy picture of American workers’ chances at a secure retirement. Retirement preparedness has improved slightly, but not for the best of reasons.

At first, workers appear to be taking action. The percentage of workers who are on track to retire with at least an 80% replacement rate has been increasing steadily, from 14% in 2011 to 18% last year and finally 20% this year. And, looking at investing behavior, employees have made some improvements. They’re more likely to rebalance their portfolios and take risk tolerance assessments than they were in earlier surveys.

However, while participation is up, actual saving is down. The average deferral rate fell from more than 7% in 2009 to 6.7% in 2012. Financial Finesse theorized that the increase in participation without a corresponding increase in saving is due to automatic enrollment.

Improvements in the market are another reason preparedness has improved even though employees aren’t saving more. As of June 30, the S&P 500 increased almost 18% over the prior 12 months.

Millennials are in particular trouble. The report found just 17% of people younger than 30 are confident they’re on track to retire. In fact, millennials were the only demographic that showed a drop in preparedness, falling from 19% in 2012. Generation X, while up from 15% last year, isn’t much better off than their younger counterparts. Just 18% said they were on track to retire.

Financial Finesse blamed millennials’ drop in preparedness on lack of engagement with the planning process. Marketing materials frequently target participants who are closer to retirement, alienating millennials. Auto-enrollment may also contribute to lack of engagement if millennials feel like once they’re contributing, they don’t need to do anything else.

“They are participating in retirement plans but not actively involved in the retirement planning process, likely because it is so many years ahead and this generation tends to focus on the here and now,” Financial Finesse CEO Liz Davidson said in a statement. Millennials are also used to getting information as soon as they need it and managing their finances wherever they are on their smartphones, she added. “They’ve become accustomed to dealing with their finances this way. The proactivity that planning for retirement requires is counterintuitive to their nature in a lot of ways — it requires more thought, patience and planning than most of their day-to-day decision making.”

That’s bad news for a group of people who will live, on average, two years longer than the current generation of retirees, who will likely pay higher taxes at retirement and with access to fewer benefits as corporate pensions are phased out and Social Security is unable to fill the gap.

Women reported low levels of confidence, too. Just 17% said they were on track to retire. However, that percentage is up from 13% in 2012. “Since the same percentage of women reported not using a financial calculator this year as last (63%), that means the increase was real improvement, as the percentage that know they are not on track fell from 23% last year to 21% this year,” according to the report.

“On average, women contribute about 6.9% of their pay into retirement savings and have an average retirement plan balance of under $60,000,” Davidson said. “This is highly concerning when you consider the challenges women face, including lower wages, smaller retirement plan balances, longer life spans, caring for their families, higher health care costs, and a host of other things.”

Participation in retirement plans fell among low-income workers (those making less than $60,000 annually), from 86% in 2012 to 84%. With it fell their confidence: 10% said they would be able to replace 80% of their income when they retire, down from 11% last year.

Although participation is down for those workers, three-quarters are contributing up to their employer’s match, up from 73%. Furthermore, fewer low-income workers said they’ve taken a loan or hardship withdrawal.

Check out Older Workers More Likely to Have Access to Retirement Plans on ThinkAdvisor.