Retirement savers see a $1.2 million goal, but many expect far less

Americans in workplace retirement plans say they would need about $1.2 million to retire comfortably, according to a new Schroders survey. Many do not expect to get close, which puts a sharper focus on debt, everyday costs and how retirement money is invested.

Schroders, a global investment manager, surveyed 1,500 investors between March and April. The firm found that only 30% of respondents think they will have at least $1 million saved by retirement.

More than half, 51%, said they expect to retire with less than $500,000. Within that group, 24% said they expect to have under $250,000 saved, according to Schroders.

Daily costs are crowding out long-term saving

The gap is not only about ambition. Schroders said respondents pointed to higher living costs, credit card balances and other expenses competing for the same paycheck.

One-third of survey participants said they have more credit card debt than retirement savings. Another 55% said competing expenses prevent them from saving 10% of their pay toward retirement, according to the survey. And 69% said rising costs have made retirement feel out of reach for their generation.

Deb Boyden, head of U.S. defined contribution at Schroders, said many investors are having trouble turning good intentions into actual retirement readiness. Defined contribution plans include accounts such as 401(k)s, where workers put in money and often choose from investment options offered by an employer plan.

Schroders said some participants have cut their plan contributions or borrowed from their 401(k)s to address other goals, including paying down debt, covering emergency costs or keeping up with higher day-to-day expenses.

The target number keeps moving

The $1.2 million figure is not the only estimate in the market. Northwestern Mutual said earlier this year that Americans believe they need $1.46 million to retire comfortably in 2026.

Those perceived targets can change as prices change. Northwestern Mutual’s figure rose by $200,000 from the prior year, while Schroders’ latest figure is lower than its previous estimate of $1.28 million.

Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth in New York, said a single retirement number may not fit every household. He told CNBC that the right amount depends on factors such as where someone lives, their lifestyle and the age at which they retire.

Boneparth said savers who feel behind may benefit from focusing less on a distant round number and more on habits such as consistent saving, reducing high-interest debt and investing earlier. He also said many people who feel stuck have not mapped out their situation with a professional.

Some retirement cash is sitting on the sidelines

Schroders also found that 24% of retirement plan participants do not know how their retirement savings are invested. Among those who do know, the survey showed 26% of retirement assets in cash and 27% in equities, another word for stocks.

Cash can feel safer because it does not swing like stocks can. Over long periods, however, holding too much cash can mean missing out on potential investment growth. That trade-off is known as opportunity cost.

Boyden said excessive cash can create a meaningful opportunity cost for participants with long time horizons. Schroders said respondents cited safety, diversification and waiting for the right time to invest as reasons for holding cash.

For workers trying to measure progress, CNBC reported that Schroders and advisors pointed to reputable financial professionals and workplace retirement plan education resources as places to start.

This story draws on original reporting from CNBC.