Retirement un-readiness: Americans ‘concerned’ about outliving their assets

A comfortable retirement may be hard to reach, according to a new Schroders 2024 U.S. Retirement Survey of 2,000 investors. Age 63 is the average age at which participants expect to retire, yet half of non-retired Americans (51%) report they are “concerned” or “very concerned” about outliving their assets in retirement.

Americans who participate in a 401(k) retirement plan believe they will need $1.2 million saved to retire comfortably, yet 46% expect to have less than $500,000 in savings at retirement, including 23% who say they will have less than $250,000.

“While the magic retirement savings number is over $1 million for many plan participants, they are not saving or investing correctly to reach this goal,” said Deb Boyden, Head of US Defined Contribution, Schroders. “Without better planning and a roadmap to close the savings gap, a comfortable retirement will be out of reach.”

That’s why employers need to step up efforts to increase financial advice to employees. “Providing personalized education and tools to guide employees can be very effective for improving retirement readiness,” said Boyden. “By helping employees understand their plan options, savings rates and the potential impact of their decisions, employers empower them to make smarter, more informed choices that better align with their long-term goals.”

Social Security income

The most popular ages non-retirees plan to file for Social Security benefits are ages 65 (23%) and 62 (12%). Forty-three percent plan to take Social Security before age 67 – the full retirement age for everyone born in 1960 or later, and just 1 in 10 plan to wait until at least age 70 – the age at which an individual reaches their maximum monthly benefit.

“There is no one-size-fits-all answer for when to file for Social Security, however, delaying benefits for as long as possible can add several hundred dollars to those monthly checks,” said Boyden. “With so many Americans behind on retirement savings, waiting to collect Social Security benefits can have a significant impact on your quality of life during your decumulation years.”

Retirement income

According to Schroders research, 88% of non-retired Americans are at least slightly concerned about not knowing how to best generate income during retirement.

Asked to forecast how much monthly income will be required to live comfortably, non-retirees said $4,947 on average, which is higher than the $4,258 of monthly income today’s retirees report they are generating.

Among Americans participating in a workplace retirement plan, 50% said their primary investment objective was to generate steady income; 41% said it was to grow assets; and 9% said to protect assets.  Consistent with these objectives, 94% said they would be interested in a retirement investment product from their employer that actively manages the risk of loss while seeking to grow assets at a rate equal to the current cash rate plus 5%.

More than one-third (38%) of plan participants said their plan provided a retirement income solution (up from 31% in 2023); 36% said they didn’t know; and 26% said no. However, 90%of those who are offered an income solution in their plan say they are likely to use it.

Among those who don’t know or do not have a retirement income solution in their plan, 62% wish their plan did; 29% were unsure; and 9% said it wasn’t necessary.

“The need for financial advice is greater than ever, and employers are in a unique position to meet this demand with in-house resources or by partnering with external providers,” said Boyden. “By stepping up efforts to provide advice, employers can not only help employees make better decisions today but also build a more financially secure workforce for the future.”

Lost paycheck

The majority of non-retired Americans (57%) said the idea of a loss of regular paychecks is concerning and 22% describe it as “terrifying.”

In addition to Social Security, the top five income sources non-retired Americans expect to draw upon after retiring include:

• Cash savings (60%)
• Workplace 401k, 403b or 457 plan (48%)
• Spouse’s workplace 401k, 403b or 457 plan (37%)
• Investment income (36%)
• Spouse’s pension plan (27%)

A majority of retirees don’t have any specific strategies to generate income in retirement. Among those with a more formal approach, the top three strategies for generating income include:

• Dividend-producing stocks or mutual funds (23%)
• Systematic withdrawals from retirement accounts (22%)
• CDs (17%)

Related: Saving on shaky ground: Helping employees navigate retirement planning during inflation

“The fear of losing a steady paycheck in retirement is very real for many Americans, and it underscores the importance of having reliable income streams,” said Boyden. “Employers should strongly consider offering more in-plan solutions that can bridge the gap between asset accumulation and decumulation to help employees with this critical transition.  By integrating these solutions into their plans, employers can address one of the biggest concerns their employees face and help them retire with greater confidence.”