Retirement savings confidence gap widens across America

If retirement feels more like a question mark than a plan, you're not alone. A recent Schroders survey shows the average American worker believes they need $1.28 million to retire comfortably. But only 30% think they’ll actually get there. Nearly half expect to retire with less than $500,000. One in four expects to have under $250,000.

That mismatch between expectations and reality is more than just a mathematical problem—it’s a confidence problem. And when confidence erodes, planning becomes harder. We procrastinate, panic, or avoid the topic entirely. But the truth is, most people don’t need a radical change. They need a structure they can stick to.

This article is for anyone who feels behind, overwhelmed, or unsure whether they're “doing enough.” Let’s slow things down and reframe what retirement planning really means—and how to make progress, even if you’re starting late.

Schroders' 2024 study surveyed 1,500 investors, including over 600 people currently participating in workplace retirement plans. The results were sobering:

• Workers said they needed $1.28 million to retire.
• But only 30% expect to have even $1 million.
• Almost half expect to retire with under $500,000.
• One in four expect less than $250,000.

This isn't just pessimism—it’s based on what people are seeing in their day-to-day financial lives. Higher living costs, rising debt burdens, and limited wage growth are compressing the ability to save.

Meanwhile, retirement age keeps rising, and healthcare costs continue to outpace inflation. Add student loan debt or caregiving responsibilities, and it’s clear why so many feel they’ll never catch up. Yet averages don't tell the full story. What matters is how your current savings behavior aligns with your retirement timeline and needs.

There are three reasons this gap persists—and worsens.

1. Savings inertia. Many workers either don’t enroll in their workplace retirement plan, or they start with default contribution levels (often 3–5%) and never raise them. Even those who do participate often stop increasing their savings rate after receiving the employer match.

2. Misalignment between risk and time horizon. People nearing retirement often shift into conservative portfolios too early, reducing growth potential. Others stay too aggressive with no emergency fund, risking withdrawals during market dips.

3. Short-term financial pressure. When money is tight, retirement savings is one of the first things people cut. It's not because they don’t care—but because the timeline feels distant compared to today’s bills.

And this creates a dangerous feedback loop: the more people feel behind, the less likely they are to engage with planning. But if you never run the numbers, you never feel in control. That’s what fuels the retirement savings confidence gap.

Let’s pause here and introduce a simpler way to frame retirement confidence. Not through a single goal number, but through a personal formula:

Confidence = Contribution Rate + Time Horizon + Risk Alignment

Think of it as a 3-part system. You don’t need to perfect every part—but strengthening just one area can improve your overall trajectory.

• Contribution Rate: Are you saving at least 12% to 15% of your income (including employer match)? If not, can you step up 1% annually?
• Time Horizon: How many years until retirement? Could working 2–3 years longer increase your projected nest egg significantly?
• Risk Alignment: Are your investments suited for your age and time horizon? Too much cash or too little equity exposure can quietly erode long-term returns.

Instead of chasing a single magic number like $1 million, start with these variables. They’re within your control—and they drive the eventual outcome far more than guesswork or anxiety ever will.

Schroders found that 31% of investors don’t even know how their retirement funds are allocated. And among those who do, cash is surprisingly common—23% of respondents reported holding cash as a top allocation, second only to equities. This reflects a common fear: volatility. Especially after market corrections or economic uncertainty, it can feel safer to sit in cash.

But for long-term goals like retirement, that safety is deceptive. While cash might avoid short-term losses, it also forgoes long-term gains. Over a 20-year period, the stock market has historically outperformed both bonds and cash—often by a wide margin. What this means: if you’re 35 or 45 and holding half your portfolio in cash, you’re not being conservative. You’re silently shrinking your future.

It’s okay to be cautious. But understand the tradeoff. With inflation at 3% or more, holding cash means you're losing purchasing power every year. That’s not risk avoidance—that’s guaranteed erosion. A better approach? Layer risk by timeline. Keep 6–12 months of expenses in an emergency fund. But let your retirement dollars grow in diversified equity and bond funds suited for your age.

It’s one thing to under-invest. It’s another to raid your retirement account before retirement. Schroders reports that 17% of workers have borrowed from their 401(k) or other work-sponsored plans. Reasons include medical costs, credit card debt, buying a home, or covering emergencies.

While 401(k) loans may not trigger taxes or penalties if repaid on time, the opportunity cost is real. You lose out on compound returns. And if you leave your job—or are laid off—you could be required to repay the loan within 60 days or face tax consequences. In practice, this means one financial crisis (e.g. job loss) can trigger another (401(k) default).

If you’ve already borrowed from your retirement plan, don’t panic. Focus on repaying it systematically—and then rebuild an emergency buffer to avoid future borrowing. The key lesson: retirement savings isn’t just for “later.” It works best when it’s left alone to grow. That’s what makes time your greatest ally—or your silent threat.

If this all feels overwhelming, here are some quiet questions that can help you recalibrate:

• How long do I expect to work?
  If the answer is 20 years or more, your risk profile should reflect that timeline—not short-term fears.
• How much am I saving monthly—after employer match?
  If it's under 12% of your salary, you may need to adjust upward gradually.
• How much of my portfolio is in growth assets (like equities)?
  If you're under 50 and have less than 60% in equities, you may be playing too defensively.
• Do I have emergency savings to protect my retirement funds?
  Even $5,000 in a high-yield savings account can prevent premature 401(k) loans.
• When was the last time I reviewed my allocations or rebalanced?
  Set a calendar reminder to reassess every 6 months. Don’t let inertia run the show.

These aren’t checklist items. They’re mindset resets. They help you shift from fear-based thinking to structure-based planning.

Confidence doesn’t come from perfect math. It comes from consistent, intentional action. Here are three micro-behaviors that rebuild planning rhythm:

1. Auto-escalate contributions.
If your 401(k) or IRA platform allows it, set your savings rate to auto-increase by 1% each year. You’ll barely notice the change—but your future balance will.

2. Use a “raise rule.”
Any time you receive a salary bump or bonus, allocate 50% of it to long-term savings before it hits your lifestyle. This way, your savings rate grows with your income.

3. Stop looking at the market daily.
Market swings are noise. Retirement investing is signal. Unless you’re retiring next year, short-term volatility isn’t your problem. Staying disengaged from market headlines can actually help you stay the course.

Think of these as habits—not hacks. They reduce emotional interference and keep your plan moving forward.

One of the most common misconceptions is that if you’re behind, you need to “catch up” aggressively—through big bets or radical savings shifts. But confidence doesn’t come from playing financial hero. It comes from running a durable plan.

Saving 1% more this year may not feel heroic. But over 25 years, it could add six figures to your retirement fund. Staying invested during a downturn may not feel brave. But history shows it’s what builds wealth. You don’t need to hit $1.28 million tomorrow. You need a system that works for you—and keeps working when life gets messy.

Feeling behind doesn’t mean you’ve failed. It means your system needs updating. Instead of chasing arbitrary goals or reacting to headlines, focus on the levers within your control: your contribution rate, your timeline, and your investment mix. Then protect that plan with habits: quarterly check-ins, auto-escalation, and enough cash to avoid short-term panic.

The retirement savings confidence gap is real. But it’s not unbridgeable. Because the smartest financial plans aren’t loud. They’re consistent. And the most confident savers aren’t lucky. They’re structured.