Retirement Goal Confidence Rebounds After Mid-Pandemic Drop
After a year that challenged Americans mentally, physically, and financially, things are beginning to get back to normal. In turn, it looks as though future retirees are feeling far more optimistic than they did a few months ago. According to a Schwab Retirement Plan Services survey of 401(k) plan participants, 53% now say they are “very likely” to achieve their retirement goals. This is up significantly from 2020 when only 37% said the same. As for what that goal might be, the average plan participant believed they’d need $1.9 million in order to retire.
Notably, as we come out of the pandemic, 91% of those surveyed described their current financial health as “very good” or “pretty good.” Nevertheless, the past year has had an impact on many respondents’ approaches to personal finance. For example, 48% stated that they now intended to save more in general. Meanwhile, 36% said they plan on contributing more to their 401(k) and 35% want to increase their investments outside of their 401(k) plan. Additionally, 34% plan on paying off debt.
Although retirement optimism is on the rise, there are still challenges that many plan participants face. Topping the list, 32% cited market volatility as an obstacle affecting their retirement savings. Other common issues included unexpected expenses (29%), staying current on regular monthly expenses (27%), covering educational expenses (21%), and paying off credit card debt (20%). What’s more, nearly one-quarter (23%) of those surveyed believe that they will have to delay their retirement due to the COVID-19 pandemic.
To deal with these concerns, a number of respondents noted that they’d like professional financial advice — with 44% saying they’d like assistance with calculating their retirement savings goals and 39% seeking advice on how to invest their 401(k). Schwab Workplace Financial Services head Catherine Golladay attributes this interest in professional financial planning to some of the lessons of the pandemic, explaining, “Workers went back to basics for a year and re-discovered the importance of work-life balance. Do-it-yourself retirement planning was really tested because workers were pressed in other areas.” She added, “Many have decided that more help is the answer, and they are also looking beyond retirement to other workplace benefits that support financial security.”
As Golladay points out, there are likely many ways in which the past year will impact Americans’ financial habits going forward. While “saving more” and “paying down debt” are planned changes to be expected, a greater reliance on financial planning services is an interesting potential side effect. That said, given the source of the survey (Schwab Retirement Plan Services), this aspect may be overstated. Regardless, it’s always encouraging to see optimism return — here’s hoping it’s warranted.
Also published on Medium.