Why American retirees are returning to work
A new study from the Employee Benefit Research Institute shows the rate of return to work among retirees in the United States.
New research reaffirms old contradictions in retirement planning. American workers believe they need more than $1 million in savings to retire comfortably, but most workers don’t expect to reach that goal.
Financial companies often survey American workers about the “magic number” they need to save for a comfortable retirement. The latest research comes from Schroders, a global wealth management company.
Retirement savers surveyed this spring told Schroeder they needed $1.2 million to retire comfortably.
However, half of those surveyed said they expected to retire with less than $500,000 in savings. A quarter said they expected their savings to be less than $250,000. Only 30% expect to reach the $1 million milestone.
“Participants have a $1 million goal, but many are on track to save $500,000,” said Deb Boyden, head of U.S. defined contribution at Schroders.
The survey, released July 15, surveyed 1,500 investors, including 615 workplace retirement savers.
Is it impossible to have a comfortable retirement?
The report paints a bleak picture of retirement savings. This may seem counterintuitive at a time when the stock market is at record highs.
But Americans are also dealing with years of cumulative inflation. Retirees in 2026 can expect to pay more than ever before, for example in long-term care costs.
More than two-thirds of retirement savers surveyed by Schroders believe that rising costs for health care, housing, insurance, and utilities are “putting retirement out of reach for their generation,” the report said.
More than half of savers say they are unable to save 10% of their paychecks for retirement due to competing financial priorities.
One-third of savers say their credit card debt exceeds their retirement savings.
More than a quarter said they borrowed from their retirement plans to pay off debt, prepare for a financial emergency, or cope with rising costs of living.
“What the data shows us is that saving for retirement is not the only financial priority that is receiving attention,” Boyden said.
Retirement savers are hoarding cash.
Retirement savers also reported keeping a significant portion of their savings in cash, a choice that speaks to their distrust of financial markets. Financial planners regularly advise most retirement savers to focus on two asset classes: stocks and bonds.
Here’s how savers surveyed by Schroders allocate their investments.
- Stocks, 27%
- Cash, 26%
- Corporate bonds, 17%
- Target date funds, 12%
- Private equity or credit, 12%
- Others, 6%
This breakdown suggests that the savers surveyed invested only about 56% of their money in stocks and bonds.
Schroeder asked why savers kept so much of their nest eggs in cash. The top three answers are:
- “I’m afraid of losing a lot of money if the stock market falls” 53%
- 44% to diversify investments
- 33% to wait for the right time to buy stocks
Whatever the reason, financial advisors typically caution investors against holding too much investment capital in cash, as a mix of stocks and bonds has historically yielded higher returns.
“There’s a significant opportunity cost to sitting on the sidelines and holding cash,” Boyden says.
How important is the “magic number” for retirement?
The “magic number” ranks as one of the most popular topics on retirement savings in an era when American workers are required to save for their own retirement.
A similar study released this year by Northwestern Mutual put the magic number at $1.46 million.
But retirement experts caution that arbitrary savings targets have limited use and are more of a guidepost than a hard goal.
“The message isn’t about a magic number, it’s about planning and working toward your savings goals,” Boyden said.
Not many Americans retire with $1.2 million or $1.46 million in savings. According to the 2022 Federal Consumer Finance Survey, the typical household between the ages of 65 and 74 has about $200,000 in retirement accounts.
Few retirement planners would suggest that every retiree needs $1 million to make ends meet. Most Americans retire without having anywhere near that level of savings. Many people retire comfortably with just their Social Security income.
A more achievable retirement planning goal is to aim to save 10 times your annual income by age 67. A typical American household would have just over $800,000 in savings, based on a median household income of $83,730 in 2024.
