Workers are experiencing rising inflation as the top hurdle
to saving for retirement, Charles Schwab data show.
The Charles Schwab 2022 401(k) Participant Study shows that
45% of workers called inflation an obstacle to saving, ahead of budgeting for
monthly expenses (35%), stock market volatility (33%) and unexpected expenses
“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,” Catherine Golladay, head of Schwab
Workplace Financial Services, stated in a release. “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.”
Schwab data show that workers believe they will need to save
an average of $1.7 million for retirement, down from the $1.9 million that was
reported in last year’s survey, and 47% of participants are confident they are
very likely to reach their retirement savings goals. Workers expect 401(k)
savings to be their primary financial resource in retirement and provide 37% of
income, followed by Social Security, which they expect will account for 17% of
income, according to Schwab’s research.
Because of inflation, rising costs and market volatility,
workers have begun to alter how they save, spend and invest, data show. Schwab
found that among the workers surveyed, 79% are changing their saving and
spending patterns, while 44% have changed their 401(k) investments.
Workers are reducing spending by limiting purchases (34%),
buying cheaper products (32%) and paying off debt incrementally (21%); they are
also saving less for emergencies (20%), investing less outside of their 401(k)
(18%) and lowering contributions to their 401(k) (15%), the study found.
Just under one-quarter of plan participants, or 24%, said
the COVID-19 pandemic is delaying their expected retirement date. One-third of
respondents do not know how long their savings are likely to last in
retirement, and the two-thirds who offered an estimate said they expect their
retirement savings to last 23 years on average.
Employers are addressing financial stress among workers,
recognizing that financial strain affects employee’s mental health, the survey
“Many workers say their employers have helped them manage
financial stress in the past year,” Golladay said in the release. “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
Schwab data show that 15% of employees said they have not
been under financial stress, and 26% said stress about their financial
situation has affected their job in the past year.
Survey data was gathered online from 1,000 U.S. 401(k) plan
participants ages 21 to 70.
The survey was conducted by Logica Research for Schwab
Retirement Plan Services, Inc. Respondents were actively employed by companies
with at least 25 employees, and were not asked to indicate whether they had
401(k) accounts with Schwab Retirement Plan Services. The study was conducted
this year from April 4 to April 19.
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