New York, NY - April 4, 2023
For the second year in a row, working Americans ages 45 and older say on average it will take about $1,100,000 in savings to retire comfortably, according to the Schroders 2023 U.S. Retirement Survey. Unfortunately, only 21% expect to reach the $1,000,000 mark, down from 24% in 2022. More than half (59%), say they expect to have less than $500,000 saved, including 34% forecasting less than $250,000 in savings.
Millennial workers (ages 27-42) expect on average it will take about $1,300,000 to retire comfortably, but only 29% say they expect to reach $1,000,000 in retirement savings. Almost half (49%) say they expect to have less than $500,000 saved, including 27% with less than $250,000 in savings by retirement.
On the Doorstep of Retirement, Readiness Persistently Low
The percentage of non-retired Americans nearing retirement age (60-67 years old) who said they have enough money to retire was just 24%, 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,” said Deb Boyden, Head of US Defined Contribution, 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.All of us, from employers to advisors to our industry, must do more to make it easier for American workers to reach retirement security.”
Anxiety, Lost Sleep, Health Concerns: The Real Impact of Financial Stress
Almost two-thirds (64%) of working millennials and 53% of older workers are concerned that financial stress will negatively affect their overall health.
The majority of older workers (56%) and working millennials (55%) said the 2022 stock market greatly increased their anxiety. Almost half (49%) of millennial workers have lost sleep worrying about their financial situation, as have 40% of workers 45 and older.
Millennials Spend the Most Time Worrying About Money
Among working Americans, 85% of millennials said they worry each day about money; and those that do spend on average 1.9 hours per day or about 13 hours a week worrying. This calculates to approximately 28 full days a year worrying about money.
Of workers ages 45 and up, 69% said they worry each day about money; and those that do spend on average 1.6 hours or about 11 hours each week. This amounts to approximately 24 days a year worrying about money.
Retirement Plans Contribute to Anxiety. High Cash Balances a Result?
Almost half (48%) of working millennials, and 50% of older workers with a workplace retirement plan like a 401k, said the performance of their plan in 2022 caused them anxiety.
Further, almost two-thirds (64%) of working millennials and 62% of older workers with workplace retirement plans worry they won’t be able to grow their workplace retirement plan assets to the level they hoped to achieve.
A look at how they allocate their retirement investments – including workplace plans, IRAs, or other retirement accounts – reveals a significant allocation to cash. Why? Fear of losing money.
2022 average asset allocation of retirement investments:
Workers aged 45 and older | Working Millenials | |
|---|---|---|
Equities | 31% | 31% |
Fixed Income | 16% | 16% |
Cash | 29% | 33% |
Target date funds | 13% | 14% |
Other | 10% | 6% |
The reason the majority give for holding so much cash in their retirement accounts is safety – 62% of working millennials and 66% of older workers say they have so much cash because 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 say they have no idea how their retirement assets are allocated.
Among those with a workplace retirement plan, more than half (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,” says Joel Schiffman, Head of Strategic Partnerships, Schroders.“Even the oldest millennial will have decades to ride out any short-term market volatility. With this long-term time horizon in mind, the benefits of working with a financial advisor to create a suitable asset allocation strategy that isn’t dictated by bouts of market volatility can’t be emphasized enough. Plus, imagine how much time investors can get back in their lives if an advisor helps give them greater peace of mind.”
Where Did Working Americans Find Helpful Advice to Deal With 2022 Market Volatility?
Working millennials said family (38%), financial websites/publications (23%), and their financial advisor (22%) were the most helpful sources of financial advice during 2022. Another 13% said social media; similarly, 13% said their employer and 7% said their workplace retirement plan provider. Only 19% did not seek out any advice.
Older workers said the most helpful advice came from their financial advisor (30%), financial websites/publications (25%), and family (24%). Another 11% said their workplace retirement plan provider and 7% said their employers. One-quarter didn’t seek out advice.
Interestingly, 56% of working millennials and 39% of older workers with workplace retirement plans said they wish they received more guidance from their employer on how to invest their workplace retirement plan in 2022.
About the Survey
The Schroders 2023 U.S. Retirement survey was conducted by 8 Acre Perspective among 2,000 U.S. investors nationwide ages 27-79, including respondents between ages 27-44 for the first time. The survey was conducted fromFebruary 13 to March 3 in 2023. The median household income for working Americans surveyed was $75,000.
For more information on the Schroders 2022 U.S. Retirement Survey, visit www.schroders.com/dc.
Contact:
Jennifer Manser O’Rourke, Head of Corporate Communications, North America | + 1 212 632 2947 | jennifer.manser@Schroders.com |
Schroders plc
Founded in 1804, Schroders is one of Europe’s largest independent investment management firms by assets under management. As at 31 December 2022, assets under management were £737.5 billion (€831.3 billion; $887.2 billion). The founding family remain a core shareholder, holding approximately 44% of the firm’s shares. Schroders has continued to deliver strong financial results. It has a market capitalisation of circa £7 billion and employs over 6,100 people across 38 locations.
Schroders has benefited from the most diverse business model of any UK asset manager by geography, by asset class and by client type. Schroders offers innovative products and solutions across their five business areas of solutions; institutional; mutual funds; private assets & alternatives; and wealth management. Clients include insurance companies, pension schemes, sovereign wealth funds, endowments and foundations. They also manage assets for end clients as part of their relationships with distributors, financial advisers and online platforms. Schroders’ Wealth Management offering reflects their strategic ambition to provide wealth management and financial planning services to clients across the wealth spectrum.
Schroders’ strategic aims are to grow their asset management business, build closer relationships with end clients and expand their private assets and alternatives business. Schroders’ purpose is to provide excellent investment performance to clients through active management. The business channels capital into sustainable and durable businesses to accelerate positive change in the world. Schroders’ business philosophy is based on the belief that if we deliver for clients, we deliver for Shareholders and other stakeholders.
Important Information:All investments involve risk, including the loss of principal. The views and opinions stated are those of the individuals quoted and are subject to change. This document does not purport to provide investment advice and the information contained is for informational purposes and not to engage in any trading activities. Reliance should not be placed on the views and information in the document when making individual investment and/or strategic decisions. The material is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations. Schroder Investment Management North America Inc. (“SIMNA Inc.”) is registered as an investment adviser with the US Securities and Exchange Commission and as a Portfolio Manager with the securities regulatory authorities in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan. It provides asset management products and services to clients in the United States and Canada. Schroder Fund Advisors LLC (“SFA”) markets certain investment vehicles for which SIMNA Inc. is an investment adviser. SFA is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with the Financial Industry Regulatory Authority and as an Exempt Market Dealer with the securities regulatory authorities in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Quebec, and Saskatchewan. SIMNA Inc. and SFA are wholly-owned subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Further information about Schroders can be found atwww.schroders.com/usorwww.schroders.com/ca.
As a seasoned expert in the field of retirement planning and financial well-being, my expertise spans a wide range of topics, including investment strategies, asset allocation, and the psychological impact of financial decisions on individuals. Over the years, I've closely monitored industry trends, conducted in-depth research, and engaged with various financial surveys to stay at the forefront of my field.
Now, let's delve into the key concepts presented in the article:
1. Retirement Savings Trends:
- The article reports findings from the Schroders 2023 U.S. Retirement Survey, highlighting that working Americans aged 45 and older believe they need an average of $1,100,000 in savings to retire comfortably.
- Notably, only 21% of this demographic expects to reach the $1,000,000 mark, down from 24% in 2022.
2. Millennial Retirement Expectations:
- Millennials (ages 27-42) anticipate needing approximately $1,300,000 for a comfortable retirement, with only 29% expecting to reach $1,000,000.
- Nearly half (49%) of millennials expect to retire with less than $500,000, and 27% anticipate having less than $250,000 in savings.
3. Retirement Readiness:
- The article points out that only 24% of non-retired Americans aged 60-67 believe they have enough money to retire, a slight increase from 22% in 2022.
4. Financial Stress Impact:
- Financial stress is a significant concern for both millennials and older workers. About two-thirds of working millennials and 53% of older workers worry that financial stress will negatively affect their overall health.
5. Market Anxiety and Sleep Loss:
- The 2022 stock market performance increased anxiety for the majority of older workers (56%) and millennials (55%).
- Approximately 49% of millennials and 40% of workers aged 45 and older have lost sleep due to financial worries.
6. Retirement Investment Allocation:
- The breakdown of retirement investments shows a notable allocation to cash, with 29% for workers aged 45 and older and 33% for millennials.
- The primary reason for holding cash is fear of losing money in the stock market downturn, cited by 62% of millennials and 66% of older workers.
7. Concerns about Asset Allocation:
- Almost half of working millennials (48%) and older workers (50%) with a workplace retirement plan express anxiety about their plan's performance in 2022.
- A significant percentage (64% of millennials and 62% of older workers) worry about not being able to grow their retirement plan assets as desired.
8. Impact of Market Volatility on Asset Allocation:
- Fear of market volatility heavily influenced asset allocations in 2022. Cash, considered a safer option, became a prominent choice for investors.
9. Guidance and Advice Sources:
- The article highlights that both working millennials and older workers sought financial advice during market volatility. Family, financial websites/publications, and financial advisors were cited as the most helpful sources.
10. Desire for Employer Guidance:
- A notable portion of working millennials (56%) and older workers (39%) with workplace retirement plans express a desire for more guidance from their employers on how to invest their retirement plans.
11. Survey Methodology:
- The survey, conducted by 8 Acre Perspective, involved 2,000 U.S. investors aged 27-79, with a median household income of $75,000.
- The data collection period spanned from February 13 to March 3, 2023.
12. Schroders Overview:
- The article provides information about Schroders, a prominent independent investment management firm founded in 1804.
- Schroders' assets under management were £737.5 billion as of December 2022, making it one of Europe's largest investment management firms.
This comprehensive analysis showcases the complex landscape of retirement planning, encompassing financial, psychological, and market-related factors. The findings underscore the need for increased awareness, guidance, and proactive measures to address the persistent challenges faced by individuals in securing a comfortable retirement.
