Americans believe this is the No. 1 obstacle to saving for retirement

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Inflation has come down from the dizzying 9.1% rate in 2022, but Americans are still worried rising prices will prevent them from retiring comfortably, a new survey by brokerage Charles Schwab showed.

Inflation is the top obstacle to a comfortable retirement, said 57% of the 1,000 U.S. 401(k) plan participants and an additional 100 Gen Z plan participants surveyed last spring.

Many Americans have found ways to continue saving, but still, only 34% of participants feel very likely to achieve their savings goals, the survey showed. That’s down from 43% in 2024, Schwab said.

“401(k) investors continue to face uncertainty,” said Lee McAdoo, managing director of Schwab Retirement Plan Services. “Inflation and market volatility remain top of mind, which can make it difficult to develop a long-term retirement strategy.”

How are Americans still saving?

Most Americans are cutting back their spending to prioritize retirement savings, Schwab said. Four in 10 are cutting the number of purchases they make and buying cheaper products (39%) to maintain their 401(k) contributions. Only 11% say they have reduced their 401(k) contributions due to economic conditions, the survey showed.

In addition, 401(k) loans and hardship withdrawals are down to 21% from 26% a year ago, according to the survey.

“It’s encouraging to see that most savers are prioritizing consistency in terms of their contribution rates and are largely avoiding dipping into their retirement savings,” McAdoo said. It’s “a positive sign that they are focused on their futures.”

How much do Americans think they need for retirement?

On average, workers expect they’ll need $1.6 million saved for retirement, down from $1.8 million last year “but within the range we typically see in response to the survey,” said Marci Stewart, director of client experience at Schwab Workplace Financial Services.

The decline was due to fewer survey respondents who expect to need more than $1 million, Stewart said.

“Part of that is people adjusting to a high-cost environment by tightening their spending,” she said. “As they tighten their spending belts, they may also be determining they will need less in retirement.”

On average, workers also expect to retire at age 66 and believe their savings will last 22 years in retirement, said the survey. Gen Z, or those born between 1997 and 2012, expect to retire even younger, at 62 years, on average.

“We believe they have good reason to be optimistic,” Stewart said. They have more time to invest, and they are more engaged in their finances compared to older generations at the same age, which “breeds confidence and positive behaviors,” she said.

Younger workers also have access to many more resources as they begin their careers, including personalized financial planning advice through their 401(k) plan that can give them a solid long-term plan to achieve their goals, Stewart said.

Why are 401(k) savings so important?

With confidence waning in Social Security, savers have become increasingly reliant on workplace plans for retirement income, Schwab said.

More than half (52%) of consumers ages 45 to 75 have less confidence in Social Security than they did five years ago, according to a survey released this month by nonprofit consumer education organization The Alliance for Lifetime Income (ALI). ALI surveyed 3,502 consumers aged 45-75, weighted by age, gender, and region to be representative of the national census demographics, with a corollary study of 500 financial professionals.

Even more (58%) worry Social Security benefits will be reduced, ALI said.

A dual-earning couple retiring at the start of 2033 can expect an average $18,100 lower annual Social Security benefit than if they retired now, according to an analysis from the Committee for a Responsible Federal Budget. That’s a 24% decline, the nonprofit think tank said.

How are employers helping?

About a third of those surveyed said their companies increased their pay, Schwab said. Another 15% said they received a higher 401(k) match, while added bonuses or benefits were each cited by 14% of participants surveyed.  The most provided extra benefit from employers was a health savings account, Schwab said.

“We see employers playing a vital, expanding role in employees’ financial lives well beyond providing a paycheck,” Stewart said.

On average, survey participants estimate their 401(k)s will provide 45% of their retirement income, up 2% from last year. Social Security is expected to contribute 18% to retirement income, also a 2% increase.

Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.