Inflation, volatility worries drop as retirement confidence rises, Schwab finds

Inflation and market volatility are weighing less on people’s retirement fears, and many now expect the average $1.8 million they say they need will let them retire a year earlier.

Those two factors are still the leading worries people have about retirement, though fewer 401(k) savers cited them as their top concerns this year compared with last year, according to results of a survey published Wednesday by Charles Schwab.

In 2023, 62 percent of people cited inflation as an impediment to retirement, while 58 percent said the same this year. And those worried about market volatility fell from 42 percent to 36 percent. Meanwhile, 35 percent said just keeping up with monthly expenses was a roadblock, a figure unchanged over a year. About a third of people pointed to unexpected expenses, similar to the rate in 2023, but slightly more said paying off credit card debt was an issue (27 percent versus 24 percent. And 21 percent said student loan repayment would be an issue, up from 20 percent in 2023.

The drop in worries about inflation and volatility comes as inflation declined from its recent peak of nearly 9 percent two years ago and as the stock market has pushed higher.

“Confidence is up. Workers told us they are more certain that they are going to reach their retirement goals,” said Marci Stewart, director of client experience for Schwab Workplace Financial Services. “The retirement age also shifted,” going from 66 years to 65.

This year, 43 percent of the 1,000 401(k) participants Schwab surveyed said they are very likely to achieve their retirement savings goals, up from 37 percent who said so in 2023. Gen Z respondents were the most optimistic, at 50 percent, a figure that didn’t change over a year. Forty-eight percent of millennials said they were that confident, up from 45 percent, while baby boomers went from 38 percent to 40 percent. But the biggest increase was seen in Gen X, going from 30 percent to 40 percent.

For years, people have cited inflation and volatility as leading concerns that affect their retirement security.

“While the prices of things haven’t necessarily come down at this point, the rate of inflation has slowed a bit. Prices are not rising as sharply as they were when we started to experience this inflationary period,” Stewart said.

And with losses in 2022 fading from people’s memories, volatility also became less of a concern.

“Market volatility is an interesting one. We tend to see a lot of impact to confidence or optimism when the market is negative,” Stewart said. “That anxiety is very palpable.”

While inflation affects finances simply by virtue of rising prices, the ways people react to it led to a bigger effect, data from a paper earlier this month from the Center for Retirement Research at Boston College show. In 2023, for example, 39 percent of near retirees changed their savings rates because of inflation, with an average drop of more than $4,000 per year, reflecting about 4 percent of household income. People were also more likely to take withdrawals from savings to help cover rising costs, with 23 percent of retirees and near retirees doing so last year, pulling on average more than $3,600 from their accounts, the researchers found.

However, how people react to inflation and volatility depends a lot of whether they have a written financial plan, Stewart said. Those with such plans have expressed confidence levels on retirement seven times higher than those without, she said. Having plans in place can help people stay disciplined when the market is down, for example, she said.

An unusual but encouraging finding from Schwab’s most recent survey is that people of all ages were more likely to say that having financial advice would benefit their financial situations – something that has been more common when retirement confidence was down, rather than up, Stewart said.

This year, 61 percent of people said their financial situations warrant financial advice, up from 55 percent who said the same in 2023.