According to a new Fidelity Investments survey, 55 percent of Americans are at risk for being unable to pay for basic retirement expenses. These costs include essential needs like food, housing and medical care. The poll also found that while working people of all age groups were short of their retirement income goals, Millennials – defined by Fidelity as those born between 1978 and 1988 – have a projected income gap of 62 percent compared to 81 and 71 percent for Baby Boomers and Generation Xers, respectively.
Millennials are not prepared for retirement because they are not saving nearly enough of their annual income, according to John Sweeney, Fidelity’s executive vice president of Retirement and Investment Strategies. Over half of them are saving less than 6 percent a year, which is far lower than the 10 to 15 percent suggested by many financial advisors. People in this age group may also have unrealistic expectations about how much they will actually need for retirement.
“When you factor in the expectations many have of an early retirement, along with increasing longevity and sometimes overly conservative asset mixes for investments, you can see why many people are not as prepared as they need to be to cover their expected expenses in retirement,” Sweeney said in a press release.
He also noted that young adults are playing it too safe with investments, as half of the Millennials surveyed said that they had less than 50 percent of their assets in the stock market. A common rule of thumb is that individuals under 40 should have up to 90 percent of their portfolio in stocks because they will have decades to ride out the market.
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