Workers see inflation as biggest obstacle to retirement savings goals: Schwab

Investors consider inflation the biggest obstacle to saving for a comfortable retirement, according to a new survey from Schwab Retirement Plan Services. Forty-five percent of respondents cited inflation, followed by monthly expenses (35%), stock market volatility (33%), and unexpected expenses (33%).

“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,” says 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.”

Workers believe they will need to save an average of $1.7 million for retirement, which is down from $1.9 million reported in last year’s survey, and 47% believe they are very likely to reach their retirement savings goal. They expect a 401(k) to be their primary financial resource in retirement, providing 37% of income, followed by Social Security (17% of income).

In response to rising costs and market volatility, 79% of workers are changing their saving and spending habits, while 44% have altered their 401(k) investments. Workers are cutting spending by reducing the number of purchases they make (34%), buying cheaper products (32%), and paying off debt more slowly (21%). Despite the belt tightening, workers are still saving less (33%) and spending more in general (30%). They are saving less for emergencies, investing less outside their 401(k)s and contributing less to their 401(k)s.

Almost one-quarter of workers say they plan to retire later as a result of the pandemic. One-third of plan participants do not know how long their savings are likely to last in retirement, and the two-thirds who offered an estimate say they expect their retirement savings to last 23 years on average.

Read more: There is always room for improvement for 401(k) plans

Financial strain continues to take a toll on mental health. Only 15% of employees say they have not been under financial stress, and more than a quarter of respondents say stress about their financial situation has affected their ability to do their job in the past year, similar to last year’s survey findings.

“Many workers say their employers have helped them manage financial stress in the past year,” Golladay says. “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.”

The majority of employers 60% took action to help workers manage financial stress in the form of increased pay, increased 401(k) match, and additional bonus. Some also decreased hours to allow for better work-life balance.