Most American workers believe they will need well over $1 million to retire comfortably, even as less than half expect to reach their savings goals, according to a survey from Schroders released earlier this month.
Americans older than 45 told the investment management firm that they would need an average of $1.1 million by retirement age, even as only 21% expect to save more than $1 million, a decrease from 24% in last year’s edition of the survey. Some 59% said they expect to have less than $500,000 saved, while 27% said they would have less than $250,000 saved.
Millennial workers, defined by the survey as those between 27 years old and 42 years old, believe they will need $1.3 million to retire comfortably. Only 29% believe they will surpass $1 million, while 49% expect to have less than $500,000 and 27% expect to have less than $250,000.
“There are profound gaps between what American workers say they need for a comfortable retirement and what they expect to have,” Schroders Head of U.S. Defined Contribution Deb Boyden said in a statement. “This could be from a lack of planning, or for many it might just be too hard to save and invest enough to reach their retirement goals. The fact that, once again, so few Americans nearing retirement are confident they have enough money speaks volumes about the work we still need to do.”
The survey, conducted between February 13 and March 3, relied upon the answers of 2,000 investors nationwide who ranged between 27 years old and 79 years old. The median annual household income for working respondents was $75,000.
The pessimistic responses came after one of the most volatile years for stock market performance in recent memory eroded the values of American retirement accounts. The S&P 500 index fell nearly 20% in 2022 amid inflationary pressures and the invasion of Ukraine, rivaling the 37% decline witnessed in 2008 amid the collapse of the American banking system, as well as the 12% and 22% declines witnessed in 2001 and 2002 amid the dot-com bubble.
2022 is also one of the few years on record in which both the stock market and the bond market saw negative returns. Many workers reacted by amending their portfolio allocations to become more conservative. “Given the performance of stocks and bonds last year, it’s not surprising that fear of losing money heavily influenced asset allocations, but cash shouldn’t be king, especially for millennials saving for retirement,” Schroders Head of Strategic Partnerships Joel Schiffman added. “Even the oldest millennial will have decades to ride out any short-term market volatility.”
Several additional polls over the past several months have shown that rising costs of living, as a result of record inflation, is producing a sense of economic pessimism. Headline inflation was charted at 5.0% in March 2023, according to data from the Bureau of Labor Statistics, a decline from the 9.1% rate charted in June 2022. Real wages, which consider the effect of inflation on nominal pay increases, fell 1.3% year-over-year as of March 2023, according to more data from the Bureau of Labor Statistics.
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President Joe Biden has repeatedly asserted that his administration is successfully routing price level increases, even as inflation rates remain between three times and four times higher than the rates seen at the start of his term. “We are making progress in the fight against inflation,” he commented in a recent statement. “The fight against inflation isn’t over, and every day my administration is working to give families more breathing room.”