Nest egg news: Workers say they need $1.8M to retire

Employees say they need to save a hefty $1.8 million for retirement – and expect that nest egg to last 23 years, says a new Charles Schwab study of 1,000 401(k) plan participants. Plus, they’re feeling more confident they can get there, according to Schwab’s 2024 401(k) Participant Study, which found that 43% of workers say they are “very likely” to achieve their retirement goals vs. just 37% in 2023.

What age are workers expecting to retire?

• Gen Z: age 60
• Millennials: age 64
• Gen X: age 65
• Boomers: age 68

Inflation and stock market volatility continue to be the biggest obstacles to saving for a comfortable retirement, though workers are slightly less concerned about these factors in 2024:

• Inflation: 58% (vs. 62% in 2023)
• Market volatility: 36% (vs. 42% in 2023)

“Workers are feeling more optimistic about their retirement prospects and an improving economic climate tends to boost financial confidence, but it’s not the only factor,” said Lee McAdoo, Managing Director of Schwab Retirement Plan Services. “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.”

Gen Z is the most optimistic about achieving their retirement goals:

• Gen Z; 50%
• Millennials: 48%
• Gen X: 40%
• Boomers: 40%

As retirement confidence has improved, workers’ appetite for financial advice has increased as well: 61% feel their financial situation warrants advice from a professional, higher than last year (55%). Plus, more workers would be very confident in making the right 401(k) investment decisions with the help of a financial professional (55%, up from 49%), than they would making those decisions on their own (29%, up from 27%).

Workers are most likely to seek advice from:

• their 401(k) plan (39%),
• financial advisor (35%),
• family and friends (27%), and
• their employer (25%).

Sixty-one percent are comfortable asking artificial intelligence tools like ChatGPT for help with financial planning, up from 49% in 2023. Still, more say they are very likely to follow human professional advice recommendations (60%) rather than computer-generated recommendations (19%).

“Improved 401(k) confidence is not necessarily an indicator that workers are comfortable going it alone,” said Marci Stewart, Director of Client Experience at Schwab Workplace Financial Services. “In fact, they are realizing that professional help has the potential to further accelerate their progress. Self-guided education and computer-generated advice can provide solid financial wellness support, and a human professional can validate your plan and make more tailored recommendations.”

The emerging retirement challenge: Income stream

The survey finds that more workers would like help with creating an income stream in retirement, which could reflect waning confidence in Social Security. Overall, respondents expect 43% of their retirement income to come from a 401(k), up from 40% last year. They expect Social Security to make up 16% of their retirement income on average, down from 20% last year.

Workers who are within 10 years of retirement expect to rely much more on Social Security than those further from retirement. Those who will still be working for at least 11 more years expect to rely more on their 401(k) than those closer to retirement.

Related: Employees prioritize 401(k) plans with $1.8M retirement savings goal in mind

“Uncertainty about the future of Social Security means employers will play an increasingly important role in helping workers develop a retirement income stream not only through their 401(k), but also through other workplace financial benefits that can include health savings accounts, company stock plans and traditional pension plans,” said Stewart.