Here’s How Much Money Americans Think They Need to Retire Comfortably

American workers are worried about their retirement savings and losing sleep as a result, according to the Schroders 2023 U.S. Retirement Survey, released Tuesday.

It’s no wonder they’re concerned. Working Americans 45 and older on average estimated that it will take $1.1 million to retire comfortably, but only 21% expect to reach the $1 million mark, down from 24% in 2022.

Many won’t get close. Fifty-nine percent said they expect to have less than $500,000 saved at retirement, including 34% who said they will have less than $250,000.

Millennial workers are in the same boat. Respondents in this age group estimated it will take about $1.3 million to retire comfortably. However, 49% said they will have less than $500,000 saved, including 27% with less than $250,000. Only 29% expect to hit the $1 million mark.

As for non-retired Americans who are getting close to leaving the workforce, just 24% said they have enough money to retire, up from 22% in 2022.

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

Boyden said everyone from employers to advisors to investment managers has to strive to make it easier for American workers to reach retirement security.

8 Acre Perspective conducted the survey from Feb. 13 to March 3 among 2,000 U.S. investors nationwide ages 27 to 79, including respondents between ages 27 and 44 for the first time. Working Americans in the sample have a median household income of $75,000.

Time Spent Worrying

Sixty-four percent of working millennials and 53% of older workers in the survey expressed concern that financial stress will hurt their overall health.

Majorities of both groups said the 2022 stock market greatly heightened their anxiety. Forty-nine percent of millennials and 40% of older workers said they have lost sleep worrying about their financial situation.

Among Americans in work, 85% of millennials said they worry about money every day, and those who do so spend on average of 1.9 hours per day or about 13 hours a week worrying. Schroders said this amounts to approximately 28 full days a year stewing about money.

Sixty-nine percent of workers ages 45 and up said they worry each day about money, and worriers spend on average 1.6 hours or about 11 hours each week ruminating. This amounts to approximately 24 days a year worrying about money.

Allocating Retirement Assets for Safety

Half of all workers with a workplace retirement plan, such as a 401(k), reported that their plan’s 2022 performance caused them anxiety.

Moreover, 64% of working millennials and 62% of older workers with workplace retirement plans worried that they will be unable to grow their plan assets to the level they hoped to achieve.

Here’s a look at how older workers and working millennials allocated their retirement investments, on average, in 2022 including workplace plans, IRAs or other retirement accounts:

  • Equities: Older workers, 31%; working millennials, 31%
  • Fixed income: 16%; 16%
  • Cash: 29%; 33%
  • Target date funds: 13%; 14%
  • Other: 10%; 6%

The list reveals a significant allocation to cash. Why?

The reason the majority give for holding so much cash in their retirement accounts is safety, with 62% of working millennials and 66% of older workers saying they are afraid of losing too much money if the stock market goes down.

Another point of concern: 38% of working millennials and 24% of older workers said they have no idea how their retirement assets are allocated.

Among respondents with a workplace retirement plan, 59% of working millennials said they did not change their asset allocation in those plans in 2022, 26% said they became more conservative and 15% said they invested more aggressively.

Among older workers, 65% left their allocations unchanged, 25% became more conservative and 10% invested more aggressively.

“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 statement. “Even the oldest millennial will have decades to ride out any short-term market volatility.”

Schiffman emphasized the benefits of working with a financial advisor to create a suitable asset allocation. “Plus, imagine how much time investors can get back in their lives if an advisor helps give them greater peace of mind.”

Financial Advice in 2022

Thirty percent of older workers and 22% of working millennials in the survey reported that their financial advisor was the most helpful source of financial advice during market volatility in 2022.

For 38% of millennials and 24% of older workers, family was the main source of financial advice, while 23% of the former and 25% of the latter turned for advice to financial websites and publications.

Thirteen percent of working millennials said their employer and 7% said their workplace plan provider were the best sources of advice last year. Eleven percent of older workers got the best advice from the plan provider, and 7% from their employer.

Interestingly, 56% of working millennials and 39% of older workers with workplace retirement plans said they wish they had received more guidance from their employer on how to invest their workplace retirement plan in 2022.

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