A record number of Americans are on track to reach retirement age this year, but many are feeling less confident about their after-work prospects, according to survey results that Fidelity Investments released Tuesday.
Although two-thirds of participants expressed confidence in their retirement prospects, this was down by 7 percentage points from a year ago because of the lingering effects of inflation and the high cost of living.
Only 53% of Gen Xers said they were confident about retiring on their own terms, by far the lowest level across generations. A third of this cohort said they may work in retirement to supplement their income.
Big Village conducted the national online survey in mid-December among 2,001 adult financial decision makers who own at least one investment account.
Rising Costs Worry Satisfied Retirees
Despite major challenges — including the pandemic, periods of market uncertainty and high inflation — 72% of recent retirees surveyed said that their retirement is going as planned. Seven in 10 said that they had saved and planned appropriately for this benchmark event, and that it is more enjoyable than they expected.
Fidelity attributed the general optimism to many of today’s retirees having multiple sources of predictable retirement income. Social Security benefits and pensions provide guaranteed income that can help make budgeting for essential expenses more straightforward, allowing the savings to be spent on the “nice-to-haves” or invested for more potential growth.
However, 70% of these retirees reported that the rising cost of living has eaten into their savings. Health care, in particular, has caught many off guard.
Fifty-seven percent of retirees said that they did not plan for health care costs, and that these are higher than they had anticipated. Forty-three percent said that Medicare covers less than they thought it would.
Fidelity noted that this finding is particularly concerning, as the average American can expect to spend at least $165,000 on health care in retirement, not including potential long-term care expenses.
Pre-Retirees Gain Traction
Survey participants in their planning years said that they expect to be more self-reliant when it comes to their sources of retirement income. Sixty-one percent said that retirement savings from individual retirement accounts, 401(k)s or other workplace and small-business plans will be one of their biggest income streams, compared with about half of today’s retirees.
Indeed, the current generation of retirees could be the last to use predictable sources of income such as pensions as the primary way to fund their retirement, according to Rita Assaf, vice president of retirement offerings at Fidelity Investments.
“The shift toward relying on retirement savings heightens the importance of grounding yourself in a financial plan as early as you can,” Assaf said.
One thing that pre-retirees have in common with retirees is concern about rising costs. Sixty-two percent of pre-retirees said that they are uncertain whether their retirement savings will last forever. A majority are unsettled by the rising cost of health care and uncertain what portion of their income will be covered by Social Security.
At the same time, Fidelity has identified signs that retirement savers are on the right track. The firm’s data showed strong growth and record-high account balances among IRAs, 401(k)s and 403(b)s in 2024. The savings rate approached Fidelity’s goal of 15%, which includes both employee and employer contributions.
“Many understandably feel overwhelmed, but this shift in retirement income strategy in large part involves a recharting of the planning process,” Assaf said. “This starts with staying involved and aware of your broader financial picture and leveraging investment strategies to potentially help your money work harder for you.”
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