Working Americans coming up short for comfortable retirement

American workers 45 and older think it will take about $1.1 million in savings to retire comfortably, yet only 21% expect to reach even the $1 million mark.

American workers who are 45 and older essentially know how much they need to comfortably retire. Unfortunately, a significant majority of them don’t believe they’ll get there.

According to the Schroders 2023 U.S. Retirement Survey released Tuesday, U.S. workers 45 and older think it will take about $1,100,000 in savings to retire in comfort. But only 21% expect to reach even the $1 million mark, down from 24% in 2022. Furthermore, the study showed more than half of the respondents (59%) expect to have less than $500,000 stashed away for their golden years, including 34% who expect to have less than $250,000 in savings.

Laurie Humphrey of Granite Financial, which is part of Advisor Group, says the study shows the need for older workers to review their household budget “at least annually” and stick to that budget on a monthly basis to free up the necessary funds to invest for retirement.

“With recent changes through Secure Act 2.0, additional saving within employer plans and individual retirement accounts, both pretax and Roth, provides opportunity to increase savings. Creating a plan to tell your money where to go, rather than having your money tell you where it went, needs to be prioritized when contemplating a budget,” Humphrey said.

Millennial workers, those 27 to 42 years old, expect it will take around $1.3 million for a secure and happy retirement, yet only 29% say they expect to reach $1 million in retirement savings, according to the study. Meanwhile, the survey said just under half (49%) of respondents expect to have less than $500,000 saved, including 27% with less than $250,000 in savings by retirement.

“For younger workers, retirement may seem in the distant future. That long timeline is incredibly powerful as it relates to the compounding of their potential investment returns. For millennial workers, a small tweak in their retirement savings plan today can make a big impact later on,” said Brian Hartmann, partner at Granite Bridge Wealth Management, part of Advisor Group.

Meanwhile, Americans who are over 60 and still in the workforce are not in much better financial shape. The study showed that only 24% of non-retired Americans approaching retirement age believe they have enough money to retire, a slight uptick 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.

Boyden added that the gaps could reflect a lack of planning, or for many it might just be too hard to save and invest enough to reach their retirement goals.

Elsewhere, the study showed how America’s retirement savings shortfall is physically hurting workers. Almost two-thirds (64%) of working millennials and 53% of older workers believe that financial stress will negatively affect their health, according to the study.

Moreover, most older workers (56%) and working millennials (55%) said the highly volatile 2022 stock market greatly increased their anxiety with almost half (49%) of millennials losing sleep over their financial situation.

The Schroders survey reflects responses from 2,000 U.S. investors between the ages of 27 and 79. The investors, surveyed from Feb. 13 to March 3, had a median income of $75,000.