Workers’ Confidence About Retirement Showing Signs of Improvement

U.S. employees are still worried about inflation and market volatility, but anxiety around saving for their post-work years has, in some ways, subsided.

Retirement confidence has improved slightly over the past year, according to Charles Schwab. The financial firm’s annual nationwide survey of 401(k) plan participants found that 43% of workers think they are very likely to achieve their retirement savings goals, compared with 37% in 2023.

Inflation and stock market volatility continue to be the biggest obstacles to saving for a comfortable retirement, though workers are slightly less concerned about both factors in 2024. Nearly 6 in 10 workers (58%) said inflation was an obstacle to saving for retirement, down from 62% in 2023, while 36% expressed concerns over market volatility, down from 42% last year.

“Workers are feeling more optimistic about their retirement prospects,” said Lee McAdoo, managing director of Schwab Retirement Plan Services. “An improving economic climate tends to boost financial confidence, but it’s not the only factor. We’re seeing heightened awareness around 401(k) investments and performance—a promising sign that workers are actively engaging with their accounts and cultivating knowledge to help them reach their goals.”

A growing number of workers said they know what investments to choose for their 401(k) (69%, up from 65% in 2023), according to the Schwab report, and 92% know how their 401(k) is performing. Just 8% of survey respondents said they don’t know what investments are in their 401(k) account, an improvement from 12% in 2023.

Schwab’s report is the second one in recent months to find that retirement confidence is improving slightly, though overall confidence numbers are still near historic lows.

Figures released in the spring from the Employee Benefit Research Institute (EBRI) and Greenwald Research found that workers’ and retirees’ confidence in having enough money to live comfortably throughout retirement improved slightly this year. More than two-thirds (68%) of workers, up from 64% in 2023, and 74% of retirees, up from 73%, expressed confidence in this area.

Last year, EBRI found that retirement confidence had sunk to its lowest level since the Great Recession in 2008.That report also found that inflation was the primary culprit for respondents’ lack of confidence.

“Inflation is expanding our expectations for retirement savings and putting the pressure on to plan and stay disciplined,” Aditi Javeri Gokhale, chief strategy officer, president of retail investments, and head of institutional investments at Northwestern Mutual, told SHRM Online earlier this year.

Workers Looking for Advice from Employers

Workers still think they need to save $1.8 million for retirement, the same as last year, and, on average, they expect their nest egg to last 23 years after retiring at age 65, according to the Schwab report.

That dollar amount is above the one noted by employees surveyed by Northwestern Mutual in April. That report found that, on average, U.S. adults believe they will need $1.46 million to retire comfortably, a 15% jump over the $1.27 million reported last year and a whopping 53% surge from the $951,000 target they reported in 2020.

Also significant for employers is that the Schwab report found that workers are looking for more communication and advice around their finances. More than 6 in 10 (61%) feel their financial situation warrants advice from a professional, higher than last year’s 55%. Plus, more workers would be very confident in their ability to make the right 401(k) investment decisions if they had the help of a financial professional (55%, up from 49%) than if they were making those decisions on their own (29%, up from 27%).

Besides looking for advice directly from their 401(k) plan provider (39%) and their financial advisor (35%), 25% of employees also said they want advice from their employer.

That finding comes on the heels of the SHRM 2024 Employee Benefits Survey, released in June, which found that retirement savings and planning was the second most important benefit category as rated by employers (tied with paid leave), behind only health insurance.

SHRM also found that 49% of employers offer retirement planning or investment advice online, in a group or classroom setting, or one on one, up 1 percentage point from 2023. Meanwhile, 32% of employers said they offer nonretirement financial advice in one of those three ways.