American workers appear to be working harder to save for retirement, according to a report released this morning by Fidelity Investments.

The average American household “is on track to replace 57 percent of their income in retirement,” a slight increase from the 56 percent reported in the financial service provider’s survey last fall, the new report said.

More than half (52 percent) of U.S. households are taking some action to improve their retirement readiness, including contributing to workplace retirement savings accounts and opening new accounts for retirement savings.

The new survey found that 83 percent of respondents “recognized they are not saving enough for retirement, up from 78 percent in June 2005.”

At the same time, many of the households surveyed said they were having trouble adding to their retirement savings because of higher fuel prices.

Also on the down side, “many grossly underestimated the projected costs” of living in retirement, the report said. They especially underestimated their total health care costs.

Nearly half (46 percent) of respondents said they would work at least part-time in retirement to offset their out-of-pocket health care costs, and nearly one-third (31 percent) said they “planned to retire later in order to continue receiving workplace health benefits.”

Just under half of the households expected to receive pension benefits in retirement. That percentage slipped from 51 percent last fall to 49 percent now.

Social Security is expected to be the main source of retirement income for only one in five households.

___________________________________________________

By DIANE STAFFORD
The Kansas City Star

© Copyright 2006 Knight Ridder.