Data and Research April 11, 2023

Few Workers Expect to Reach Retirement Savings Goals

Millennial and older workers expect it will take greater than $1 million saved in a workplace retirement plan to retire comfortably.

Reported by

Working Millennials have dim hopes of being able to retire comfortably with sufficient savings, projecting they will need more than $1 million in savings, new Schroders data shows.

The working Millennials cohort, ages 27 to 42, reported expecting to need approximately $1.3 million in savings to retire comfortably. Of Millennials, 29% say they expect to reach $1 million in retirement savings, while older workers aged 45 and older say they will need an average of about $1.1 million in savings to retire comfortably, with 21% of this group expecting to reach $1 million, down from 24% in 2022.

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“There are profound gaps between what American workers say they need for a comfortable retirement and what they expect to have,” stated Deb Boyden, head of U.S. defined contribution at Schroders, in a press release with the findings. “This could be from a lack of planning or, for many, it might just be too hard to save and invest enough to reach their retirement goals.”

More than half of working Americans age 45 and older say they expect to save less than $500,000, including 34% who expect to reach less than $250,000; 49% of working Millennials says they expect to save less than $5000,00, including 27% who expect to reach less than $250,000, the Schroders 2023 U.S. Retirement Survey found.

According to the data, slightly more (24%) Americans nearing retirement, age 60 to 67 years old, said they have enough money to retire, than last year, when the number was 22%.

Almost two-thirds (64%) of working Millennials and 62% of older workers with workplace retirement plans worry they will not be able to grow workplace retirement plan assets to the level they hoped to achieve, the study finds.

“The fact that, once again, so few Americans nearing retirement are confident they have enough money speaks volumes about the work we still need to do,” Boyden stated. “All of us, from employers to advisors to our industry, must do more to make it easier for American workers to reach retirement security.”

Lost Sleep

Financial stress is causing anxiety, lost sleep and health concerns for all workers, and it may be most acute among Millennials, the Schroders research showed.

Among working Americans, 85% of Millennials said they worry every day about money, and those that do spend on average 1.9 hours per day (about 13 hours per week) worrying, for a total of approximately 28 full days per year worrying about money. For workers aged 45 and older, 69% said they worry each day about money; and those that do spend on average 1.6 hours or about 11 hours each week doing so, which totals approximately 24 days per year worrying about money, Schroders found.

  • More than two-thirds of working Millennials (64%), compared with 53% of older workers, are concerned that financial stress will negatively affect their overall health; and
  • 49% of Millennials have lost sleep worrying about finances, compared with 40% of older workers.

Common financial stressors are affecting both working Millennials and older workers, the data showed.

Almost half of working Millennials (48%) and 50% of older workers with a workplace retirement plan said plan performance in 2022 caused them anxiety. Further, 56% of older workers and 55% of Millennials said the 2022 stock market performance greatly increased their anxiety, data showed.

Average Asset Allocations

Schroders’ 2022 average asset allocation data for retirement investments showed workers in the Millennial and older worker cohorts may be reacting to financial stress by holding cash, as 62% of working Millennials and 66% of older workers say they are keeping assets in cash because they are afraid of possible market losses. 2022 average asset allocation of retirement investments:

Workers age 45 and older

Working Millennials

Equities

31%

31%

Fixed income

16%

16%

Cash

29%

33%

Target-date funds

13%

14%

Other

10%

6%

“Given the performance of stocks and bonds last year, it’s not surprising that fear of losing money heavily influenced asset allocations, but cash shouldn’t be king, especially for Millennials saving for retirement,” Joel Schiffman, head of strategic partnerships at Schroders, said in the press release “Even the oldest Millennial will have decades to ride out any short-term market volatility.”

The Schroders 2023 U.S. Retirement survey was conducted by 8 Acre Perspective among 2,000 U.S. investors nationwide ages 27 to 79, including respondents between ages 27 and 44 for the first time. The survey was conducted from February 13 to March 3. The median household income for working Americans surveyed was $75,000.

Compliance April 11, 2023

Car Parts Producer Faces Retirement Lawsuit

The retirement plan for Tenneco Inc. employees is alleged to have committed two breaches of fiduciary duty.  

Reported by

Automotive parts and emissions products manufacturer Tenneco Inc. faces a new retirement plan lawsuit brought under the Employee Retirement Income Security Act.  

In Frayer et al v. Tenneco Inc. et al, plan participants Ryan Frayer and Tanika Parker, brought a class action complaint against Tenneco’s retirement plan and fiduciaries of the DRiV 401(k) Retirement Savings Plan. DRiV Automotive Inc., a business division of Tenneco, operates in Paragould, Arkansas; the complaint was filed in U.S. District Court for the Eastern District of Arkansas, Northern Division.

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“Defendants have breached their fiduciary duties to the Plan in violation of ERISA, to the detriment of the Plan and its participants and beneficiaries,” the complaint states.

The lawsuit alleges two counts of fiduciary breach, for failure of the duty of prudence and failure to monitor other fiduciaries. According to the complaint, excessive fees allegedly were charged against participants’ in-plan investments for recordkeeping services, and the plan fiduciaries failed to operate the plan prudently by failing to take advantage of the plan’s size to reduce those fees. 

Fiduciary Breaches Alleged

The plaintiffs’ complaint asks the court to certify a six-year class period “on behalf of all persons who were and/or are participants in and beneficiaries of the Plan at any time during the six-year period preceding the filing of the original Complaint and up through the present.”

Tenneco moved from Lake Forest, Illinois, to Northville, Michigan, after its November 2022 purchase by Apollo Global Management. Its 401(k) plan had 9,482 participants with account balances comprising $962,979,329 in net assets as of December 31, 2020, the complaint shows.

Because of size of the plan, “Defendants had and continue to have the ability to choose investment options not generally available and had and continue to have significant bargaining power with respect to the fees and expenses that were charged against participants’ investments and the fees and expenses charged for recordkeeping services,” the complaint states.

The Relief Sought

The plaintiffs asked the court to repay the plan for all losses and lost profits and to appoint an independent fiduciary to run the plan, among other requests.

The plaintiffs are represented by attorneys from the law firm Quattlebaum, Grooms & Tull PLLC, based in Little Rock, Arkansas; and Foulston Siefkin LLP, based in Wichita, Kansas. Tenneco’s counsel is not listed on the complaint.

The lawsuit defendants are Tenneco Inc.; DRiV Automotive Inc.; Tenneco Automotive Operating Company Inc.; the Tenneco Benefits committee; and 30 unnamed individuals.

Tenneco representatives did not return a request for comment on the litigation.

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