New "Fidelity Retirement Index" Reports America's Retirement Readiness

BOSTON, MA, June 7, 2005 -- The typical working American household is on track to replace an estimated 59 percent of projected pre-retirement income in retirement, according to a first of its kind analytical index designed to track the nation’s retirement readiness unveiled today by Fidelity Investments®.

The new "Fidelity Retirement Index^SM" revealed that the typical working American household, whose primary decision-makers are age 43 on average, has saved $18,750 for retirement and is expecting to cover the majority of retirement expenses through Social Security and pension benefits. By itself, retirement savings may only provide 10 percent to 20 percent income replacement. Further, only 15 percent of typical American households are on track to replace 85 percent or more of pre-retirement income, which is a reasonable estimate for retirement planning.

When viewed by age group, the Fidelity Retirement Index showed that younger working American households, whose primary decision-makers are ages 25 to 40, are typically on track to replace an estimated 55 percent of projected pre-retirement income when they retire. This compares to 63 percent for working American households whose primary decision-makers are mid-life workers ages 41 to 54 and 62 percent for households whose primary decision-makers are pre-retirees age 55 and older. Overall, the Index found that 16 percent of working Americans have not yet started saving for retirement.

The Fidelity Retirement Index is a first-of-its-kind national measure of retirement readiness based on a survey of more than 1,900 American households. The Index uses Americans’ broad financial picture, including workplace and individual savings, asset growth, future savings, projected social security benefits, pension payments, and retirement horizon. Representing the median – an equal number saving more and an equal number saving less – the Index is based on Fidelity’s retirement income planning methodology. Fidelity expects to report its Index findings twice a year.

"While this data may seem encouraging, Americans are relying heavily on Social Security and employer pensions and are only saving a small percentage of their personal income to fund their retirements," said Jeffrey R. Carney, president of Fidelity Personal Investments. "What this means, in effect, is that many Americans will take a significant pay cut in their retirement years, making it difficult for them to adequately prepare financially for rising retiree medical costs and longer anticipated life spans."

Fidelity today also announced plans to broaden its year-old Retirement Income AdvantageSM program, making it faster and easier for individuals in or near retirement to develop a comprehensive income plan. Later this month, Fidelity will add new retirement content and an enhanced planning tool on its Fidelity.com and NetBenefits Web sites to better address the needs of investors nearing retirement, as well as those for whom retirement is still years away but who want to take an immediate active role in understanding and participating in the retirement planning process.

Carney said the initiatives are part of an expansion of Fidelity’s income planning initiative launched in June 2004 and aimed at the first wave of over 76 million Baby Boomers¹ preparing to retire over the next decade. In addition to its Retirement Income Advantage program of tools and services for individuals and workplace plan participants, Fidelity Advisor Retirement Income Services provides financial advisors with education, planning and investment solutions to help them meet the growing client demand for retirement income planning. Fidelity also makes retirement income planning resources available to its correspondent broker-dealer and registered investment advisor clients.

Retirement Index by Life Stage

The Fidelity Retirement Index found that working American households of younger adults (ages 25 to 40) have typically saved $9,000 toward retirement and contribute $92 each month to that goal. Twenty-one percent of working younger adults have not yet started saving for retirement.

Working households of mid-life adults (ages 41 to 54) have typically saved $30,000 toward retirement and contribute $187 each month to that goal. Fourteen percent of working mid-life adults have not yet started saving for retirement.

Working households of pre-retirees (ages 55 and older) have typically saved $60,000 toward retirement and contribute $229 each month to that goal. Eleven percent of working preretiree adults have not yet started saving for retirement.

"Whether retirement is four years away or 40, retirement savers at all life stages must have a plan for meeting this important goal, especially to address the key risks that will face them in retirement," Carney said. "Fidelity is making planning easier with basic knowledge, streamlined tools and simple solutions to help more Americans get their retirement finances on track – and keep them on track – whether they invest on their own, through the workplace or through an advisor."

In developing about 200,000 income plans for retirees and pre-retirees over the past year, Fidelity has identified additional ways to simplify the process for those Americans who have not yet developed a retirement plan.

To help investors better understand their unique retirement situation and identify appropriate solutions, Fidelity will enhance its Retirement Resource Center on Fidelity.com and its NetBenefits Web site for workplace plan participants with clearly marked "pathways" for investors seeking guidance and online tools to Learn, Plan, Invest or Manage retirement finances.

Retirement Quick Check Tool

A key element of the resource center is the enhanced Retirement Quick Check.² This online guidance tool uses broad and personalized information to help identify in about 30 minutes the likelihood of an individual achieving a specific retirement goal. The tool uses current and projected income, expenses and retirement assets and conducts hundreds of historical market return simulations.

The Retirement Quick Check tool offers scenarios to show how specific adjustments to savings, expenses, asset allocation or retirement date might improve one’s "results." With easy-to-follow action steps, investors then can make desired adjustments to their plans quickly and gain information on other retirement readiness considerations such as life and disability insurance or creating emergency funds.

For investors in or near retirement, Fidelity has improved its Retirement Income Planner tool2 with enhanced modeling for pension and Social Security payments, plan comparisons and an updated analysis page. This year, Fidelity plans to introduce monitoring capabilities for investors who are years away from retirement and saving for multiple goals.

Investors Seek Planning Guidance

Since launching its retirement income planning initiative last year:

• Retirees and pre-retirees have created about 200,000 retirement income plans either with one of Fidelity’s 1,000 specially-trained representatives or via the online retirement income planner tool.
• More than 12,000 investors have attended one of Fidelity’s retail income planning workshops across the country; Fidelity has received and fulfilled nearly 125,000 requests for educational materials on retirement income planning from individuals and nearly 1.5 million investors have called Fidelity directly or visited the Retirement Resource Center on Fidelity.com to learn more about retirement income planning.
• Third-party advisors working with Fidelity report increases in helping their clients develop retirement plans and Fidelity has conducted more than 500 client continuing education seminars nationwide to help educate more than 14,500 financial advisors.
• Advisors working with Fidelity have requested about 600,000 pieces of educational and shareholder materials.
• Responding to increasing demand for income planning education and services in the workplace, the Retirement Income Planner tool is available to more than 13,000 retirement plans for which Fidelity provides administrative recordkeeping services, and their more than 12 million plan participants nationwide.

About the Fidelity Retirement Index

A national online survey was conducted for Fidelity Investments by Richard Day Research, Inc., Evanston, Ill. The survey included more than 1,900 Americans who are working full-time; earning $20K a year or more; married/partnered with individuals who are also not yet retired; and are the financial decision makers in their household. Interviews were completed May 13-16, 2005. Index calculations were based on Fidelity’s asset-liability modeling engine, which generated the percentage of potential pre-retirement net income that each individual American household is likely to replace upon retirement. The retirement index represents the median (or midpoint) of the more than 1,900 individual household percentages produced. Results were weighted to reflect demographic trends in the United States.

About Fidelity

Fidelity Investments is one of the world’s largest providers of financial services, with custodied assets of $2.1 trillion, including managed assets of $1.1 trillion as of April 30, 2005. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to more than 19 million individuals and institutions as well as through 5,500 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, one of the largest mutual fund supermarkets and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

1. Based upon U.S. Census of adult Americans, the oldest of the 76 million Baby Boomers will reach the traditional retirement age of 65 during the next 10 years.

2. Fidelity’s Retirement Tools are educational and are not intended to serve as the primary basis for investment or tax-planning decisions. Retirement Quick Check and Retirement Income Planner tools present illustrations which result from running a minimum of 250 hypothetical market simulations. The market return data used to generate the illustration is intended to provide you with a general idea of how asset mixes have performed historically. Our analysis assumes a level of diversity within each asset class consistent with a market index benchmark that may differ from the diversity of your own portfolio.

IMPORTANT: The projections or other information generated by Fidelity’s Retirement Planning Tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.

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