Few Workers Expect to Reach Retirement Savings Goals

Working Millennials have dim hopes of being able to retire comfortably with sufficient savings, projecting they will need more than $1 million in savings, new Schroders data shows.

The working Millennials cohort, ages 27 to 42, reported expecting to need approximately $1.3 million in savings to retire comfortably. Of Millennials, 29% say they expect to reach $1 million in retirement savings, while older workers aged 45 and older say they will need an average of about $1.1 million in savings to retire comfortably, with 21% of this group expecting to reach $1 million, down from 24% in 2022.

“There are profound gaps between what American workers say they need for a comfortable retirement and what they expect to have,” stated Deb Boyden, head of U.S. defined contribution at Schroders, in a press release with the findings. “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.”

More than half of working Americans age 45 and older say they expect to save less than $500,000, including 34% who expect to reach less than $250,000; 49% of working Millennials says they expect to save less than $5000,00, including 27% who expect to reach less than $250,000, the Schroders 2023 U.S. Retirement Survey found.

According to the data, slightly more (24%) Americans nearing retirement, age 60 to 67 years old, said they have enough money to retire, than last year, when the number was 22%.

Almost two-thirds (64%) of working Millennials and 62% of older workers with workplace retirement plans worry they will not be able to grow workplace retirement plan assets to the level they hoped to achieve, the study finds.

“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,” Boyden stated. “All of us, from employers to advisors to our industry, must do more to make it easier for American workers to reach retirement security.”

Lost Sleep

Financial stress is causing anxiety, lost sleep and health concerns for all workers, and it may be most acute among Millennials, the Schroders research showed.

Among working Americans, 85% of Millennials said they worry every day about money, and those that do spend on average 1.9 hours per day (about 13 hours per week) worrying, for a total of approximately 28 full days per year worrying about money. For workers aged 45 and older, 69% said they worry each day about money; and those that do spend on average 1.6 hours or about 11 hours each week doing so, which totals approximately 24 days per year worrying about money, Schroders found.

• More than two-thirds of working Millennials (64%), compared with 53% of older workers, are concerned that financial stress will negatively affect their overall health; and
• 49% of Millennials have lost sleep worrying about finances, compared with 40% of older workers.

Common financial stressors are affecting both working Millennials and older workers, the data showed.

Almost half of working Millennials (48%) and 50% of older workers with a workplace retirement plan said plan performance in 2022 caused them anxiety. Further, 56% of older workers and 55% of Millennials said the 2022 stock market performance greatly increased their anxiety, data showed.

Average Asset Allocations

Schroders’ 2022 average asset allocation data for retirement investments showed workers in the Millennial and older worker cohorts may be reacting to financial stress by holding cash, as 62% of working Millennials and 66% of older workers say they are keeping assets in cash because they are afraid of possible market losses. 2022 average asset allocation of retirement investments:

“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,” Joel Schiffman, head of strategic partnerships at Schroders, said in the press release “Even the oldest Millennial will have decades to ride out any short-term market volatility.”

The Schroders 2023 U.S. Retirement survey was conducted by 8 Acre Perspective among 2,000 U.S. investors nationwide ages 27 to 79, including respondents between ages 27 and 44 for the first time. The survey was conducted from February 13 to March 3. The median household income for working Americans surveyed was $75,000.