Personal Finance: A nanny for your retirement plans?
I wanna hold your hand. Many an aging boomer recalls the famous Beatles song, but the tune could apply just as aptly to recent efforts by mutual fund giant Fidelity to become your retirement nanny. Well, the Boston behemoth probably would not put it that way, but the firm is busily touting its retirement planning tools that reside on its website as well as its brand-new Fidelity Retirement Index released this week. The firm has developed nearly 200,000 retirement plans over the past year and clearly sees aging, angst-ridden boomers as a business opportunity.
The index, drawn from a survey of more than 1,900 households, is cause for alarm—and a wakeup call for millions of boomers whose retirements are nearing with increasing speed. Consider:
- The typical working American household has saved $18,750 for retirement, with the typical worker expecting to cover the majority of his or her post-work-life expenses through Social Security and pension benefits. $18,750? That barely buys you an Asian midsize sedan.
- Only 15 percent of Americans are on track to replace 85 percent or more of their preretirement income. That's the amount that Fidelity and others believe you will need. (It used to be 70 percent, but that was before healthcare expenses went on their tear and private pensions became a curious relic of a bygone era.)
- Sixteen percent of working Americans have not yet started saving for retirement.
None of this might matter if we all dropped dead at 60. But modern medicine is keeping more of us alive every day and longer, too. It is not unreasonable for today's working boomers to expect to live to be 90.
So, what can you do about it? Well, Fidelity would like you to check out its Retirement Quick Check tool on its website, which will run what-if scenarios telling you whether you are saving enough and how much of a shortfall you might expect in needed income at retirement. The answer, which will hardly come as a surprise, is that you aren't saving enough.
But sometimes knowledge is a good thing. Perhaps knowing how far behind you are, or how far you need to go, may inspire some midcourse correction. "We find when you tell people the truth that they feel much better and in control of their life," says Ellyn McColgan, who heads up Fidelity's brokerage unit.
And if the task of saving more, spending less, or planning for the future is too much to bear, Fidelity (along with the rest of the mutual fund and financial services industry) will be only too happy to help.
As will U.S. News. You can find more retirement tips in our current Annual Retirement Guide.
Tim Smart is assistant managing editor for the Money & Business section.
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