The top obstacle right now to saving for a comfortable retirement is inflation, according to a new survey conducted by Schwab Retirement Plan Services. The survey, conducted annually among a pool of nationwide 401K plan participants, describes how 45% of all respondents listed inflation as the key hurdle to overcome in meeting retirement goals.
Inflation far outweighed other economic hurdles for retirement among respondents, including keeping up with monthly expenses (35%), stock market volatility (33%), and other unexpected expenses (33%), according to the results.
“Workers have been through a lot over the past two years and it’s only natural that recent economic and geopolitical turbulence has continued to fuel financial concerns,” said Catherine Golladay, Head of Schwab Workplace Financial Services. “While plan participants can’t control inflation or the markets, the good news is they are taking steps to manage their finances with an eye to the future.”
The average amount that workers believe they’ll need to save for a comfortable retirement went slightly down when compared with the prior year, to $1.7 million from $1.9 million. Slightly under half of all respondents (47%) feel they can “likely” reach such a retirement goal, the results read.
Respondents also believed that their 401K accounts would be their “primary financial resource in retirement,” a shift from a perspective that often places Social Security benefits in the most important category for current retirees. Respondents believe that their 401K accounts will account for as much as 37% of their retirement finances, with Social Security coming in at 17%.
An overwhelming majority of respondents — 79% — described inflation as the cause of a change to their spending and saving habits. 44% describe current economic turmoil as altering investment levels in their 401K accounts in reaction to the climate.
A toll has also been taken on the mental health of workers during this time, with 26% of respondents describing how stress about finances has impacted their ability to perform their duties at work.
“Many workers say their employers have helped them manage financial stress in the past year,” said Golladay in a statement. “With talent management top of mind for so many employers, demonstrating support for employees through tough times plays a key role in both loyalty and recruitment.”
For current retirees, inflation has also driven some older Americans to seek out new strategies to make ends meet, including seeking out roommates to help cover rising living costs.
Read the results of the survey.