The gap between what Americans think they will need to retire, versus what they say they’ll actually have, is starting to look like a chasm.
Schroders’ 2022 U.S. Retirement Survey found that working Americans say on average it will take $1,100,000 in savings to retire comfortably, but 56% say they expect to have less than $500,000 saved. Approximately 36% forecast having less than $250,000 in savings, leaving 24% within the realm of reaching the $1,000,000 mark in retirement savings.
Alarmingly, even more respondents (54%) who are nearing retirement age (60-67 years old) report that they will have less than $250,000 saved for retirement, while 57% of retirees report that they had less than $250,000 saved at retirement.
Another key indicator–the percentage of Americans nearing retirement who said they have enough money to retire–declined from 26% in 2021 to 22% this year.
Living the dream–or nightmare?
Despite the gap in savings goals, some respondents are hoping that luck shines on them. When the pre-retirement group was asked how they’d cover the shortfall and achieve a dream retirement, the answers weren’t exactly inspiring:
- Win the lottery (35%)
- Sacrifice what I want today to save for later years (25%)
- Stay on the current path (25%)
Among those who have already retired, just 3% describe their situation as “living the dream,” 37% say they are comfortable, 37% said “not great, not bad,” 18% are struggling, and 5% are “living the nightmare.” A likely reason is that 44% of retirees say their expenses in retirement are higher than expected, while just 8% say expenses are less.
Overall retirement concerns were plentiful among those surveyed with many citing inflation and healthcare as the biggest worries:
- Inflation lessening the value of assets (65%)
- Higher than expected healthcare costs (64%)
- A major market downturn significantly reducing assets (53%)
- A health issue draining savings (52%)
- Taxes reducing my retirement savings (49%)
- Not being able to afford the lifestyle they desire (49%)
Amid these concerns, a significant amount (69%) of working Americans plan to keep working in retirement due to:
- A need to cover basic living expenses (56%)
- Wanting to stay busy (51%)
- Keeping active and in good health (49%)
“These are seriously challenging times, and they seem to be taking a toll on the American worker and their belief about achieving a comfortable retirement,” said Joel Schiffman, Head of Intermediary Distribution, North America, Schroders.
“This year, inflation is the number one concern Americans have about their retirement, and next year, it may be something else.”
Lack of a plan and overwhelmed
Only 23% of Americans say that they have a written retirement plan to guide their decisions, while 40% have done some planning but don’t have a formal plan, and 37% have not done any planning. Among those without a plan, 76% find the idea of planning overwhelming and 56% believe it doesn’t make sense because life is so uncertain.
However, among those who have done retirement planning, the confidence grows:
- 91% say their plan has been useful to them, with 33% saying it has been critical to putting them on a better path for retirement;
- Only 9% report that they don’t pay attention to their plan.
“Given the relatively small percentage of Americans who have taken the time to create a specific plan for generating enough assets for retirement, it’s not surprising to see that many believe a dream retirement is out of reach,” said Schroders’ Schiffman.
He added that, as an industry, “we need to drive the benefits of planning, of investor education, of starting sooner to save in defined contribution plans and IRAs and investing for growth.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
