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According to Schroders' 2026 U.S. Retirement Survey, Americans currently participating in a workplace retirement plan (e.g. 401k, 403b or 457 plan) think they will need to save $1.2 million to retire comfortably. However, rising costs, credit card debt and competing expenses appear to be putting this target out of reach for many, as 51% expect to have less than $500,000 saved by retirement -- including 24% who say they will have less than $250,000 saved. Just 30% believe they will reach the $1-million milestone before retiring.
This savings shortfall has 81% of plan participants at least slightly worried about running out of money in retirement. A mix of competing financial demands is impacting their retirement readiness:
• 69% of plan participants believe rising healthcare, utility, insurance and housing costs have put retirement out of reach for their generation
• 55% are unable to save 10% of their paycheck for retirement due to competing expenses
• 33% report their credit card debt is higher than their retirement savings
Workplace Retirement Plans Not Always Prioritized
Nearly 3 in 4 plan participants (74%) report that a workplace retirement plan is their single most important retirement asset. However, 27% have decreased contributions to their plan, with 70% doing so in the past two years. Additionally, 27% have borrowed money from the plan.
The most common reasons for taking loans from their workplace retirement plan include:
• To bring down credit card or other debt (36%)
• To pay for unforeseen family or personal emergencies (31%)
• To keep up with the increasing cost of living (27%)
"Rising costs are forcing tough tradeoffs, and saving for retirement is often the first thing that gets deprioritized," said Deb Boyden, Head of US Defined Contribution at Schroders. "As an industry, we can't look at retirement savings in isolation. Credit card debt, rising costs and emergency expenses are all part of the same equation. Plan sponsors who address these realities holistically, rather than focusing on retirement savings alone, are better positioned to move the needle on retirement readiness."
Retirement savings sitting on the sidelines
Approximately one-quarter of plan participants (24%) don't know how their retirement assets are allocated. Among those who do know, allocations across all retirement savings (workplace plans, IRAs or other retirement accounts) reveal a significant portion of assets parked in cash.
How retirement investments are allocated:
• Equities -- 27%
• Cash -- 26%
• Fixed income -- 17%
• Target date funds -- 12%
• Private equity/credit -- 12%
• Other -- 6%
The top three reasons for allocating a portion of their retirement nest egg to cash include:
• To pursue safety, as more than half (53%) agreed with the statement, "I am afraid of losing too much money if the stock market goes down."
• To diversify my investments (44%)
• To wait and watch the stock market for the right time to buy (33%).
"For investors who are not planning to retire in the next five years, holding one-quarter of your savings in cash comes with a significant opportunity cost," said Boyden. "Concerns about market volatility and downturns are understandable given the current macro backdrop. To alleviate these concerns, innovative new investment solutions have been developed that can lessen the impact of market drawdowns and thereby provide participants some peace of mind."
Most plan participants (53%) spend at least an hour a day worrying about money, 59% are concerned that financial stress will negatively affect their health and a majority (58%) wish they received more guidance from their employer on how to invest their retirement plan assets.