New Study Highlights Retirement Savings Shortfall for All Generations

The acronym RPM once meant more to biking and car fanatics than it did to retirees, but now it’s also shorthand for “Retirement Preparedness Measure.” These days, it’s the absolute latest way to gauge whether your golden years are more likely to resemble a scene from “The Great Gatsby” or “Les Miserables.”

This new measure from Fidelity Investments (www.fidelity.com) shows how close Americans are (or not) to meeting their post-retirement expenses and compares how Baby Boomers, Gen Xers and Gen Yers stack up to one another.

(Cue the drumroll.)

“The median [RPM] score indicates working Americans are on track to meet just 74 percent of their estimated retirement expense goals [including housing, food and health care], and face a 26 percent income gap,” says John Sweeney, Fidelity’s executive vice president of retirement and investment.

That’s the median—also considered “America’s RPM”—and it rates a “yellow,” for “fair” on the color-coded retirement preparedness spectrum. The full breakdown listed below is based on data from Fidelity’s much-anticipated 2013 Retirement Savings Assessment survey, which notes that 55 percent of households ranked only “fair” or “poor”:

•    Dark Green (very good or better): 33 percent are on track to cover 95 percent or more of total estimated expenses, even in a down market.

•    Green (good): 12 percent are on course to only cover essentials.

•    Yellow (fair): 14 percent are coming up short and would likely require modest adjustments to their planned lifestyles.

•    Red (poor): 41 percent were so far off track that significant lifestyle adjustments would be needed.

The differences among the generations were also eye-opening.

While Baby Boomers are generally in the “green zone,” the reality is that as a whole they are on track to reaching only 81 percent of their goal, which eliminates the possibility of travel and entertainment. Gen Xers (those born between 1965-1977), on the other hand, made the “yellow zone” at 71 percent.

The younger Gen Yers who may have aspirations of retiring early? Well, they have the most time to improve their current “red” status of 62 percent of their goal.

The good news is that they—or anyone—can boost their retirement preparedness by using six “accelerators”.

For example, if you can afford to increase your annual savings to at least 15 percent of your income (including any employer 401(k) match), it would bring the median RPM score of 74 up to 82. Another involves asset mix: By replacing portfolios that are either too conservative or too aggressive with an age-appropriate allocation, the same median RPM increases to 77.

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