It’s not $1.46 million, but Americans are inching higher at the amount they’ll need to live a comfortable retirement, finds new research out today by Schroders.
According to the 2024 U.S. Retirement Survey, participants enrolled in a workplace retirement plan—whether that be a 401(k), 403(b), or 457 plan—believe they’ll need $1.2 million to reach a secured retirement, surpassing the previous $1 million dollar mark.
However, Schroders’ findings show a disconnect between participants’ beliefs and their current reality. Almost half of respondents (46%) expect to have less than $500,000 in savings at retirement, and 23% say they won’t even have $250,000 by the time they leave work. In reality, just 29% are confident in their ability to achieve $1 million by the time they retire.
“The difference between how much money plan participants say they need to live comfortably and how much they expect to have saved is miles apart for most retirement savers,” said Deb Boyden, head of U.S. Defined Contribution at Schroders. “While the magic retirement savings number is over $1 million for many plan participants, they are not saving or investing correctly to reach this goal. Without better planning and a roadmap to close the savings gap, a comfortable retirement will be out of reach.”
“While the magic retirement savings number is over $1 million for many plan participants, they are not saving or investing correctly to reach this goal.”
Deb Boyden, Schroders
Schroders’ research uncovers deep financial insecurities among U.S. retirement plan participants. Even as 49% believe the value of their investment portfolio has grown “significantly” in 2023, 40% are unsure how to go about protecting their gains. Respondents also say they worry too much about money (60%), to the point where they lose sleep over their finances (39%).
Plus, without a retirement three-legged stool, many are left feeling as if they must fend for themselves—70% of those surveyed say their workplace plan is their single most important retirement asset.
An incoming presidential election has also contributed to this uncertainty, with almost all respondents (88%) expressing concerns about the impact it will have on their retirement savings. While only 9% plan to be more aggressive in their portfolios leading up to November, more respondents are choosing to stay the course (32%), take a conservative approach in their investing (28%), or are even unsure with their direction.
Rising financial insecurity
The findings emulate recent research by other houses that show the state of financial uncertainty among Americans. Prudential’s latest report, released Monday, shows that despite being a decade out of the conventional retirement age, 55-year-olds currently hold a median retirement savings of less than $50,000.
A lack of communication and education, along with economic and rising cost of living factors, could explain why so many are lacking in savings. In Schroders’ report, 28% of plan participants admit to not knowing how their retirement assets are allocated. Among those who do, allocations across all investments, including workplace plans, individual retirement accounts (IRAs), or other retirement accounts, are made emotionally, Schroders reports.
For example, Schroders’ research shows that 28% of respondents hold cash in their retirement accounts. Sixty-six percent of those investors say they allocate to cash because they’re fearful of losing too much money in case of market volatility. Their reasoning could end up costing them, Schroders report, as it diminishes opportunities to compound growth. Another 24% of respondents confess they’re unsure on how to invest their cash holdings.
Ultimately, investors say they want financial guidance, yet few have the opportunity to work with professionals. Fifty-nine percent of respondents say they wish they received more guidance from their employer on how to invest their assets.
SEE ALSO:
- $1.46 Million: New ‘Magic Number’ for a Comfortable Retirement
- Gen Xers Nearing Retirement Report Median Savings of $50k
- Retirees Considering Temp Work to Keep Up with Cost of Living
- Savers Concerned About Inflation; Few Taking Action to Combat It
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
