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What’s the magic number for retirement savings? Americans say it’s more than $1 million, but most will fall short of that goal.

Americans think they need more than $1 million to retire, but the majority won’t meet that goal.According to the Schroders 2023 U.S. Retirement Survey, working Americans age 45 and older expect they will need about $1.1 million in savings in order to retire, but only 21% of people in that age group expect to have

what’s-the-magic-number-for-retirement-savings?-americans-say-it’s-more-than-$1-million,-but-most-will-fall-short-of-that-goal.

Americans think they need more than $1 million to retire, but the majority won’t meet that goal.

According to the Schroders 2023 U.S. Retirement Survey, working Americans age 45 and older expect they will need about $1.1 million in savings in order to retire, but only 21% of people in that age group expect to have even $1 million. That’s down slightly from the 24% in 2022 who said they expected to save that much. 

The survey found that 59% of those workers expect to have less than $500,000 saved for retirement, including 34% who said they will 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,” said Deb Boyden, head of U.S. defined contribution at Schroders. “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.”

Read: Americans think they need $1.25 million to retire. Is that enough?

Millennial workers, who are now between the ages of 27 and 42, expect on average that they will need about $1.3 million to retire comfortably. Only 29%, however, said they expect to reach $1 million target in retirement savings, while 49% said they expect to have less than $500,000 saved. Meanwhile, 27% expect to have less than $250,000 in savings by retirement.

Meanwhile, 24% of working Americans age 60 to 67 said they have enough money to retire, slightly more than the 22% who said the same in 2022.

Losing sleep over money

Almost two-thirds (64%) of working millennials and 53% of older workers are concerned that financial stress will negatively affect their overall health. Among millennial workers, 49% said they have lost sleep worrying about their financial situation, while 40% of workers 45 and older said the same.

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More than eight out of 10 millennials, or 85%, said they worry every day about money. That group spends an average of 1.9 hours a day, or about 13 hours a week, worrying about money, which adds up to about 28 full days a year. 

Among workers age 45 and older, 69% said they worry every day about money, spending an average of 1.6 hours a day, or about 11 hours a week, feeling anxious about their finances.

The majority of older workers, at 56%, and of working millennials, at 55%, said the turbulence in the stock market in 2022 greatly increased their anxiety. 

Also read: 2023 has been rough so far. Use it as a wake-up call for your retirement planning.

Among those with a workplace retirement plan like a 401(k), 48% of working millennials and 50% of older workers said the performance of their plan in 2022 had caused them anxiety. Almost two-thirds of working millennials, at 64%, and of older workers, at 62%, who have workplace retirement plans worry that they won’t be able to increase the assets in their plan to the level they hoped to achieve.

Financial allocations and advice

A look at how workers allocate their retirement investments — including in workplace plans, IRAs and other retirement accounts — reveals that they keep a significant amount in cash. Among workers age 45 and older, 29% of their asset allocation was in cash. For millennials, that figure was 33%.

The reason the majority give for holding so much cash in their retirement accounts is safety: 62% of working millennials and 66% of workers 45 and older said they have that much cash because they are afraid of losing too much money if the stock market goes down.

Now read: If your last-minute IRA contributions are still sitting in cash, it could be costing you thousands of dollars

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Meanwhile, 38% of working millennials and 24% of workers 45 and older said they have no idea how their retirement assets are allocated.

Among millennials with a workplace retirement plan, 59% said they did not change their asset allocation in 2022, while 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,” said Joel Schiffman, head of strategic partnerships at Schroders. “Even the oldest millennial will have decades to ride out any short-term market volatility.”

OPINION: Are you falling behind on retirement savings? It’s time to catch up.

When it came to advice about money, there were several sources workers turned to.

Working millennials said family members (38%), financial websites or other publications (23%) and their financial adviser (22%) were the most helpful sources of financial advice in 2022. Another 13% named social media, while 13% said their employer and 7% said their workplace retirement-plan provider. Almost 1 in 5, or 19%, said they did not seek out any advice.

Workers 45 and older said the most helpful advice came from their financial adviser (30%), financial websites or publications (25%) or family members (24%). Another 11% said they got helpful advice from their workplace retirement-plan provider, while 7% named their employer. One-quarter of older respondents said they didn’t seek out advice.

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

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