Hoping to retire, crack open a book and relax on the beach sometime soon? Not so fast.
The soaring prices you're seeing at the grocery store, gas pump and — well, everywhere, really — may complicate things. Inflation is now the top obstacle standing in the way of saving for a comfortable retirement, according to a recent online survey of 1,000 401(k) plan participants from Schwab Retirement Plan Services.
“Workers have been through a lot over the past two years, and it’s only natural that recent economic and geopolitical turbulence has continued to fuel financial concerns,” Catherine Golladay, head of Schwab Workplace Financial Services, said in a news release.
Here's what to know about how rising prices are impacting retirement plans — and how much you need to save.
Inflation and retirement saving
It's no secret that surging prices are eating away at Americans' wallets. Consumer prices jumped 9.1% in the 12 months ending in June — the largest increase since 1981, according to data from the U.S. Labor Department.
In the Schwab poll, workers identified inflation as the main barrier to saving for a comfortable retirement in 2022, with 45% of respondents saying it was an obstacle they face. After inflation, their concerns centered around keeping up with monthly bills (which 35% of respondents identified as a barrier), stock market volatility (33%) and unexpected expenses (33%). Rounding out the list were paying off credit card debt and affording children's education.
The outlook for their retirement is anything but rosy. Just under half of respondents indicated that they feel they're very likely to meet their retirement goals. That's even less than last year, when the share of retirement optimists was 53%.
Uncertainty is scary, and one third of plan participants surveyed said they do no know how long their savings are likely to last. Of those who did give an estimate, they guessed that on average their retirement savings are likely to last 23 years.
But inflation, too, has older Americans scared they'll run out of money: An American Advisors Group survey earlier this year found that 29% of people believe they will outlive their retirement funds.
How much do you need to save for retirement?
Now for the good news. Despite rising prices, planning, saving and investing now will help you prepare financially when you're ready to ditch your job for good. And with health care costs continuing to climb, people living even longer and the future of Social Security and pensions so uncertain, it's extra important to do so.
On average, workers think they need to save $1.7 million for retirement, according to Schwab's poll.
But that exact number will be different for everyone depending on several factors, including when you want to retire and what you envision for your retirement lifestyle.
If you want to have a lifestyle in your retirement consistent with the one you're used to while you work, Fidelity recommends trying to save 10 times your income by the time you’re 67 years old. That equates to saving one times your salary by the time you're 30, three times your salary by age 40, six times your salary by age 50 and eight times your salary by age 60.
"The sooner you start, the more your money is going to be working for you," Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group, previously told Money. "You can make it up over time if you start later; however, you’re going to have to save exponentially more to end up with the same kind of outcome.”