American savers are in fair shape when it comes to retirement preparedness, Fidelity Investments reported recently. Fidelity’s biennial retirement savings assessment study finds that Americans’ retirement score reached a record high 80, which means that the typical saver is on track to have 80% of the income Fidelity estimates he will need to cover retirement costs.

This represents a big improvement over a score of 62 in 2005, when the first assessment was conducted. Even with the improvement, though, the study reveals that half of survey respondents are at risk of not being able to fully cover essential expenses in retirement.

Fidelity said in a statement that its retirement savings assessment is built on data from responses to a survey run through the retirement planning platform it uses every day with customers. The result is a numerical indicator that shows whether savers are on target to meet their estimated income needs.

The score places households into four categories, linked to a numerical range, on the retirement preparedness spectrum, based on their ability to cover all estimated retirement expenses in a down market: needs attention, 0–65; fair, 66–80; good, 81–95; and on target, 96–150+.

The national online survey includes responses from nearly 3,200 working households earning at least $20,000 a year in the fall of 2017. Respondents range in age from 25 to 74 and expect to retire at some point and have already started saving for retirement.

Generational Shift

Fidelity’s retirement score enables comparative views of preparedness across generations. In the new study, baby boomers have a score of 86, up from 85 two years ago, with the availability of pensions playing a big role.

Although boomers are in reasonably good shape to cover essentials, they have less time to act and fewer options to improve their preparedness, according to Fidelity. Many are considering working longer.

Gen Xers’ retirement score remains flat at 77. In their favor, however, is the fact that they have 12 or more years to improve. Fidelity said Gen Xers’ most powerful steps are to increase savings and consider working longer.

Millennials show the most improvement, with a retirement score of 78, up from 76 two years ago. As a result, Fidelity notes, they have caught up with Gen Xers, thanks in part to stock market gains in relation to their investment time horizon.

Even with the benefit of time on their side for saving and investing, though, the data suggest that millennials’ savings rates are flat and that they are not investing aggressively enough. For this generation, the most important step to improve preparedness is to consider working longer, Fidelity said.

“While younger generations typically don’t have jobs with access to pensions as a source of guaranteed retirement income, there are many actions that can be taken to improve retirement readiness, including saving more, managing debt and making smart investment decisions,” explained Ken Hevert, Fidelity’s senior vice president of retirement, in a statement.

Improving Retirement Preparedness

Fidelity sees as an encouraging sign in its new assessment: The average household is just one point away from moving into the good zone (81–95), meaning most savers will be on track to cover essential expenses in retirement.

One reason for this improvement is that investors are saving more, driven by a higher median savings rate — now at 8.8%, up from 3.6% in 2006. According to the study, boomers save 9.9% of their salaries, up from 9.7% in 2016, while millennials are holding steady at 7.5%. However, both rates fall well short of Fidelity’s suggested total savings rate of at least 15%, including employer contributions.

In addition, the percentage of respondents who allocate their assets in a way Fidelity considers age appropriate remains steady at 55%, down two points from 2016, but a significant improvement over 2006 when just 48% allocated their assets in an age-appropriate manner. Fidelity points out that the improvement is in part a result of many workplace retirement plans having begun to default employees into target date funds and managed accounts.

According to the study, many people may not be planning adequately for retirement because they are unsure where to start or worry their personal retirement income goal may be unattainable. However, the findings raise actions individuals can take to gain better control over their financial future and boost retirement preparedness: increase savings, review and adjust asset allocation, and delay retirement.

“The fact that the retirement score moves so dramatically when all three ‘accelerators’ are applied is a clear demonstration of the profound impact simple steps can have on retirement preparedness,” Hevert said.

In another finding, the new assessment reveals that respondents who have a health savings account tend to have higher retirement scores: 84, compared with 79 for those without a HSA.

401(k) Fee Analyzer Tool

Few Americans know how much they pay in fees for their 401(k) plans, and many aren’t even aware they pay any fees, according to a new survey from TD Ameritrade. Of the 1,000 investors surveyed, only 27% knew how much they were paying in 401(k) fees and 37% thought they paid no fees at all.

The reality is far different, of course. The plans have administrative fees, investment fees for the mutual funds a participant chooses and fees for optional services such as loans — which can all affect the performance of retirement assets — and plan sponsors are required to disclose all regular expenses and fees to plan participants on a quarterly basis.

“It can be onerous to read through all the disclosure information and documentation to understand the fees, but just because it’s hard to decipher doesn’t mean those fees don’t exist,” said Matthew Sadowsky, director of retirement and annuities at TD Ameritrade.

With that in mind, TD Ameritrade launched a free 401(k) fee analyzer tool powered by FeeX, which is now available to all self-directed investors. The tool provides an analysis of the fees participants pay for their defined contribution plans, including administrative fees and individual fees for the mutual funds they own in their plan. “To have all-in costs at your fingertips online is a big deal,” says Knut Rostad,” president of the Institute for the Fiduciary Standard.

While individual investors don’t have much say in the administrative fees of their plans, which fall under the jurisdiction of plan sponsors, they do choose the funds they invest in; and when they leave an employer, they decide whether to maintain their savings in the prior 401(k) plans or roll them over into IRAs or 401(k) plans at their new employers.

“The common belief is that all 401(k) funds have institutional pricing that’s cheaper than those available to individual investors, which is not always the case,” according to the TD Ameritrade announcement. “Oftentimes, similar securities with comparable holdings can be found in the public markets at a lower fee … And, if more than one 401(k) is involved, consolidating multiple accounts into a single IRA can make it easier to monitor and manage progress toward retirement goals.”

Nearly one-third of Americans roll their old 401(k) accounts into new employers’ plans, slightly more than one-third choose rollover IRAs, and 22% keep their funds with the original employers. In addition, 13% cash out their plan when leaving a job, which can result in tax penalties, depending on the age of the plan participant, and will reduce the individual’s retirement savings.