How much do you need to save to retire? It's the question everyone with a 401(k) seeks to answer. The magic number? A hefty $1.6 million, on average, according to Charles Schwab's annual nationwide survey of 401(k) retirement plan participants.
That's a lot of dough, even if it's $200,000 less than 401(k) plan participants thought they needed to sock away in last year's survey.
Still, amassing a sizable seven-figure nest egg seems like a stretch for many 401(k) investors. In fact, retirement confidence dipped in Charles Schwab's latest survey. Just 34% of plan participants feel "very likely" to achieve their financial goals. That's down sharply from 43% in 2024.
Trouble Saving For Retirement
What's causing the bearish mood? Inflation. For the second straight year, rising prices were cited as the No. 1 obstacle to achieving a comfortable retirement, the study found.
"Even though inflation has come down, people are still struggling with higher prices," said Marci Stewart, director of client experience at Schwab Workplace Financial Services.
But it's not just inflation putting doubts of a secure retirement in the minds of 401(k) savers. The typical culprits get the blame. About four in 10 (38%) cite keeping up with monthly expenses, 33% blame stock market volatility, 32% cite pesky unexpected expenses, 26% point to paying off credit-card debt, and 23% cite paying medical bills as a savings obstacle.
The Good News?
The good news is the latest retirement study isn't all doom and gloom.
Despite the cash crunch from higher inflation, only 11% of 401(k) plan participants said they reduced contributions to their 401(k)s, according to the survey. Instead of cutting into savings, they're trimming costs elsewhere in their lives. Many (40%) say they're buying fewer things and 39% say they're buying cheaper goods.
And that small behavioral change helps them stay on track with their retirement savings. "That's very much a bright spot," said Stewart. If 401(k) savers want to reach the $1.6 million savings target, they must commit to saving and consistently contribute to their 401(k), she says.
Saving $1.6 Million For Retirement
Saving $1.6 million may sound like a moonshot for many people. But one way of reaching that savings goal is to keep saving no matter if the stock market is going up or down. The strategy of contributing to your 401(k) every paycheck, a consistent savings pattern known as dollar-cost averaging, means savers can buy more shares of the stock funds in their 401(k)s when markets are down.
"Consistently paying yourself first, putting money in your 401(k) plan for that longer period of time, helps people experience that exponential growth known as compounding," said Stewart.
And while $1.6 million is what the average person thinks they'll need to save, the real number for most people is different. The reason? The right size nest egg is based on a number of factors, like lifestyle, the cost of living in your geographical location, and the age you retire.
Survey respondents expect their 401(k) retirement savings to last 22 years, on average. So, for someone that retires at age 66 — the average age Schwab survey respondents said they expect to retire — that means their 401(k) account balance won't run out until age 88. And that's pretty good planning when you consider the average life expectancy of an American is 78.6 years, according to the Centers for Disease Control and Prevention.
Overcoming Retirement Savings Barriers
No doubt, saving for retirement is a challenge. And 401(k) savers are depending more on their retirement accounts to generate income in their golden years.
On average, 401(k) savers estimate that their retirement portfolio will provide half (45%) of their retirement income, up two percentage points from a year ago. In contrast, respondents expect Social Security to contribute just 18% of income, according to survey respondents.
It's no surprise that 74% of survey respondents said they would not take a new job if the employer did not offer a 401(k) plan to save for retirement.
The average retirement age for survey respondents was 66, up from 65 in the 2024 survey, but still earlier than the full retirement age of 67 for Americans born after 1960.
Only a fraction of 401(k) plan participants stopped contributions to their 401(k) plans due to inflation, market volatility and other headwinds. But one in four survey respondents said they adjusted the asset mix in their portfolios. And 79% of those savers said they moved into more conservative investments.
Taking a conservative turn could make it harder to meet long-term savings goals. Still, it's fine if 401(k) savers make portfolio adjustments if they are aligned with their investment goals and their personal tolerance for risk, Stewart says.
Keeping An Eye On Retirement Savings
Most people are tracking their 401(k) statements on a regular basis. Two of three (62%) survey respondents eyeball their statements monthly or more, according to the survey. One in four (27%) view their accounts quarterly. Only 5% peek just once a year.
One-fourth of respondents say they're checking their statements more than they did last year. That's likely due to market volatility driven by President Donald Trump's tariffs and other policy changes impacting financial assets. "We're really seeing a lot of engagement," said Stewart.
But Stewart stresses that 401(k) plan participants who view their statements regularly need to do so with an objective in mind.
"There's a difference between giving it a look-see and unpacking it and lifting the hood and saying, 'OK, is my investment strategy really matching my objectives,'" said Stewart. "We recommend that folks review their portfolios regularly."
More than one-quarter (29%) of respondents say they are "very confident" making 401(k) investment decisions on their own. But 51% of respondents feel very confident making decisions with the help of a financial professional, such as a financial advisor.
Overall, participants want help calculating how much they need to retire and at what age that will be possible. Boomers seek advice on figuring out how to create an income stream in retirement, according to the survey.
