Retirement Savers Stick with Cash Due to Fear of Stock Losses

In order to protect themselves from another slump in the stock market in the future, many Americans are keeping large portions of their retirement savings in cash.

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An investment manager called Schroders has just released a study examining millennial workers' retirement plans, showing that they hold the majority of their retirement funds in cash, which is more than any other asset class. For workers 45 and older, however, that represents just 29% of their retirement funds.

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Among millennials and workers 45 and older, over 60% of respondents indicated that safety was what kept them in cash when asked about their greatest fear in the stock market, citing a fear of losing their money in it. There was, however, a recent rally that caught the attention of those who avoided equities, which saw the Nasdaq 100 enter into a bull market last week, and the S&P 500 post back-to-back quarterly gains during this rally.

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Joel Schiffman, head of strategic partnerships at Schroders, has said that it was fascinating to see what millennials were afraid of when it came to investing in the market. When an individual has a time horizon of years to prepare for retirement, fear cannot serve as a strategy. 

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The fact that millennials are kept in the lurch by a big lump sum of cash means that they will have a harder time accumulating the $1.3 million they stated they needed to retire comfortably in the future. Based on an average guesstimate of $1.1 million by older workers, that figure far exceeded the $1.1 million average. 

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In spite of this, millennials believe that they will not be able to accomplish that goal because of their age. In less than a third of cases, there is a reasonably good chance of reaching the one million dollar mark, but 27% think they will not have more than $250,000 saved up for retirement when they are ready to retire. As a result, only 21% of older workers are expecting to have a million dollars saved for retirement, which is a significant drop from the 24% who expected this last year when the question was asked. 

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2,000 Americans were surveyed during the middle of February to the beginning of March in order to collect the results.