Latest Ups and Downs of U.S. Retirement Preparedness

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.