New survey results find a wide disconnect between what Americans believe they will need to save to live comfortably in retirement versus what they have actually saved.
According to Schroders’ 2022 U.S. Retirement Survey, working Americans age 45 and older say on average it will take $1,100,000 in savings to retire comfortably. Yet only about a quarter (24%) of respondents expect to reach the $1,000,000 mark in retirement savings. In contrast, more than half (56%) say they expect to have less than $500,000 saved, including 36% forecasting less than $250,000 in savings.
More concerning is that significantly more respondents (69%) nearing retirement age (60-67 years old) report that they will have less than $500,000 saved for retirement, including 54% who say they will have less than $250,000 saved.
Perceived Readiness
Meanwhile, those nearing retirement age who say they have enough money for retirement has dipped. In 2021, the percentage of working Americans nearing retirement age who said they have enough money to retire was 26%; this year, that number has declined to 22%.
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.”
Top Concerns
Consequently, the subdued expectations that respondents are conveying may be due to the barrage of challenges since the start of the pandemic, Schroders observes. Not surprisingly, the top concerns respondents have about retirement include:
- inflation lessening the value of assets (65%);
- higher than expected health care costs (64%);
- a major market downturn significantly reducing assets (53%);
- a health issue draining savings (52%);
- taxes reducing my retirement savings (49%); and
- not being able to afford the lifestyle they desire (49%).
Amid these concerns, about 7 in 10 respondents (69%) say they plan to work in retirement. The primary reasons cited include:
- to cover basic living expenses (56%);
- stay busy (51%); and
- keep active and in good health (49%).
In fact, a considerable number of retirees (44%) say their expenses in retirement are higher than expected, while just 8% of respondents say their expenses are less, the findings show.
“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,” notes Joel Schiffman, Schroders’ Head of Intermediary Distribution, North America. “This year, inflation is the number one concern Americans have about their retirement, and next year, it may be something else. Challenges will come, but they can’t derail our focus on saving and preparing for our retirement,” he says.
Making Planning a Priority
Unfortunately, the ongoing challenges may be influencing investor confidence in retirement planning, the study notes. Schroders found that only 23% report having a written retirement plan to guide their decisions. This compares to 40% who have done some planning but don’t have a formal plan, and 37% who 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, 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.
“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,” Schiffman further observes. “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.”
Schroders’ survey was conducted by 8 Acre Perspective among 1,000 U.S. investors nationwide ages 45–75 from Feb. 17–28, 2022. The median household income for respondents was $75,000.
