Having a retirement savings plan should instill confidence in employees, but a
A Schroder's survey of 2,000 retirement plan participants found that employees believe they'll need $1.2 million to retire comfortably. However, only 29% think they'll come close to that amount, with 46% estimating they will have less than $500,000 saved when they leave the workplace, and a quarter saying they'll have less than $250,000. This unstable financial future is taking its toll on employees, with 60% saying they worry too much about money and 39% saying it keeps them up at night.
"The difference between how much money plan participants say they need to live comfortably and how much they expect to have saved is miles apart for most retirement savers," Deb Boyden, head of U.S. defined contribution at Schroders, said in a release. "They are not saving or investing correctly to reach this goal."
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Much of employees' hesitation to make moves with their retirement savings is predicated on a shortage of information and fear. Twenty-eight percent of survey respondents said they don't know how their retirement assets are allocated, and of those who do, many are holding onto a disproportionate amount of cash, rather than investing. Two-thirds pointed to concern over losing their money in the stock market, while another 24% said they weren't sure how to invest properly. Even those who saw an increase in their portfolio in 2023 are still nervous, with 40% saying they don't know how to protect the gains they earned.
"Fear can hold us back in many different aspects of life — including retirement planning," said Boyden. "For savers with long-term horizons, large cash allocations create an opportunity cost that prevents you from taking advantage of the powerful benefits of compound growth."
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An additional source of stress for plan participants are the financial repercussions from this year's election, with nearly 30% saying they will take a more conservative savings approach in the upcoming months.
"Uncertainty around elections can lead to poor financial decisions, such as panic selling or hoarding cash," said Boyden. "It's crucial to stick to a long-term retirement plan, even during uncertain times, to avoid making emotional decisions that could harm your financial wellness."
Yet employees' don't have to weather these fears alone, and the majority of those surveyed said that their workplace retirement plan was their most important retirement asset. However, they would also appreciate more help with financial planning from their employer. Employers can offer a variety of resources such as access to financial advisers, digital savings platforms, financial workshops and seminars. Sending out consistent education about keeping investment options updated, and communicating any changes in policies that affect retirement savings are valuable as well.
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While employers may not be able to get all employees to their optimum retirement savings amount, any extra efforts in the area of financial wellness can go a long way.
"Without better planning and a roadmap to close the savings gap, a comfortable retirement will be out of reach," Boyden said.
