Americans Think They Need $1.3M For Retirement, But Most Aren't Even Close. Here's How You Can Close The Gap

Forbes

2 days ago

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Only 30% of Americans think they're ready for retirement, according to a new report from investment management company Schroders. In a 2025 survey, respondents said they needed to save an estimated $1.28 million to retire comfortably, but the majority of them didn't come even close.
Out of 1,500 investors polled , just 30% expected to have saved enough by retirement. A little under half (48%) expected to have less than $500,000 saved, while 26% expected to have less than $250,000.
The survey included responses from 1,500 U.S. investors nationwide from ages 29-79, including 602 currently participating in a workplace retirement plan.
Other surveys found similar lines of thinking in American retirement readiness: An April 2025 Gallup survey found that 40% of Americans surveyed had no money in a retirement savings account.
With more than half of Americans (57%) living paycheck to paycheck in 2025, according to MarketWatch, saving for retirement may take a back seat to more immediate financial responsibilities, like rent, groceries and bills.
There are, however, ways that you may still be able to inch toward a sizable retirement fund.
Setting aside a portion of your paycheck is the most effective way to budget for retirement, and raising the percentage you save will go the distance.
Make sure you're maxing out any employer match to a 401(k), so that you don't lose free money. A 2024 report from investment company Vanguard found that the average company match was 4.6% of pay. According to the Bureau of Labor Statistics, the median American worker had a salary of $67,704 for men and $56,316 for women by Q4 2024, making the average employer match $3,114 for men and $2,590 for women.
Of those with investment accounts, almost a third (31%) have no idea how their retirement assets are allocated, according to Schroders.
To make sure you're putting away enough for retirement, however, Vanguard says you would need to contribute 12% to 15% of your pay, including employer contributions. But a 2023 Vanguard report found that 25% of participants contributed less than 4% in 2022. The same participants were likely missing out on a full employer match.
Those without an employer match program can opt for an IRA account, which can be self-funded and provides enrollees with tax advantages, designed to help save for retirement. Perks include the ability to deduct contributions from taxable income, resulting in a lower tax bill.
Starting early is always better when it comes to saving, specifically because of the opportunity it gives your money to earn compound interest.
401(k) accounts can compound monthly, quarterly, or annually, depending on the type of investments in the account. Investments will grow faster the more often they're compounded. Funds that earn interest must be reinvested to enjoy the benefits of compounding.
Roth IRA accounts are optimal accounts to take advantage of compound interest, as long as the funds are invested. Any growth in a Roth IRA account is tax-free, and qualified withdrawals are tax-free.
While more is obviously better when it comes to retirement contributions, make sure you're able to cover day-to-day expenses.
Withdrawing from a 401(k) before age 59½ incurs penalties, typically a 10% additional tax. Worse, the move prevents investors from earning on any gains their money may earn while invested. The same penalty applies for IRA accounts, with the exception of Roth IRA accounts, which allow penalty-free withdrawals.
For a more flexible account that allows withdrawal, start building an emergency fund in a high-yield savings account.
Read More: 6 Best IRA Accounts of 2025