Summary
- Americans say they need $1.2 million to retire comfortably, but more than half of savers expect to fall well short of it.
- The gap has less to do with market returns than with participation, with fewer than half of U.S. adults owning stocks at all.
- Reinvested dividends have added a little over two percentage points a year to S&P 500 returns, which compounds into a six-figure difference over 25 years.
- The investors who fared best through the last four crashes weren’t the ones with the best forecasts.
How much money do Americans say they need to retire comfortably? According to the Schroders 2026 U.S. Retirement Survey, released last week, the answer is $1.2 million.
A cool million is a good start. The problem is that over half of the survey participants expect to have less than $500,000 by the time they’re ready to retire. Nearly a quarter expect less than $250,000.
Meanwhile, some 81% told Schroders they’re at least slightly worried about running out of money in retirement.
After many years in this business, I understand why numbers like these can feel discouraging. But I don’t believe despair is justified. The market’s long-term record suggests the shortfall many people describe has less to do with investment returns and more to do with participation—simply showing up and staying invested.
The Market Did Its Job
Let’s start with the facts. Over the past 25 years, the S&P 500 Total Return Index has compounded at 8.83% a year. That time period covers the dotcom collapse, the global financial crisis, the COVID crash and the 2022 bear market.
Merrill’s research team puts the long view even more starkly. Over every 15- and 20-year rolling period since 1950, the S&P 500 delivered a positive annualized total return. One hundred percent of the time. Volatility doesn’t disappear with time, but the odds have historically shifted in the patient investor’s favor.
So if the market cooperates more often than not, why do half of American savers expect to fall short of their retirement goals?
The Federal Reserve Bank of Philadelphia asked a version of that question and found that fewer than half of U.S. adults personally own stocks. Among those who don’t, the two most cited reasons were insufficient financial resources (45%) and limited understanding of the stock market (39%). Volatility concerns, competing priorities and past bad experiences followed.
I see this as a participation problem, and it’s solvable.
The Power of Compounding
Again, the S&P 500 has returned 8.83% annually over the past 25 years—with dividends reinvested.
Without dividends reinvested, it’s 6.80%. The difference is a little over two percentage points a year.
Two points doesn’t sound like much, but it compounds over time. Watch what it does.
A $100,000 portfolio compounding at 8.83% for 25 years grows to roughly $829,000. The same $100,000 compounding at 6.80%, which is what you’d have earned collecting your dividends in cash and spending them, grows to about $518,000.
That’s a more than $300,000 difference. Same index. Same holding period. Same market crashes. The only variable is whether the distributions went back to work.
In a recent article, Kiplinger’s described compounding as “money’s superpower,” noting that failing to reinvest your dividends, interest and capital gains would derail the whole thing. Your earnings need to be available to make even more earnings.
This is especially important for investors nearing or entering retirement. Around age 60, many people switch their distributions to cash payouts without recognizing it as a portfolio decision. It can feel like routine housekeeping, but it may be the largest allocation change they ever make.
Time Is the Variable
Here’s another way to look at it.
Money you need in three years and money you need in twenty are not the same thing, and you shouldn’t be invested as though they are.
The danger isn’t a market crash or a bad five-year stretch. It’s what some people tend to do in the middle of one. Merrill ran the numbers on a $100,000 equity portfolio starting in 2007. Investors who sold at the bottom and sat in cash were left with $64,000 today. Those who sold at the bottom and bought back a year later saw $445,000. And if they never touched it, patient investors ended up with $766,000 today.
Since 1930, the S&P has returned nearly 35,000%. Strip out just the 10 best days of each decade, and that falls to just 133%.
Discipline Beats Brilliance
The encouraging news is that Americans seem to be getting better at staying in the market, and they’re doing it the boring way.
Fidelity reported that 401(k) and 403(b) savings hit record levels in the first quarter of this year, with the average employee contribution reaching 9.6%, the highest on record. Nearly one in five participants raised their savings rate, largely through automatic increases. Only 5.7% touched their allocation.
I believe that’s the whole formula. Contribute automatically. Reinvest automatically. Leave the allocation alone.
The Wall Street Journal recently profiled Costco, one of our favorite stocks. Thousands of the company’s hourly employees have accumulated more than $1 million in their 401(k)s, helped along by a company contribution that arrives whether or not the worker is paying attention. Nobody in this story is a stock picker.
Where We Come In
Our ABC Investment Plan does exactly what the data above recommends. You choose a fund and a day of the month, and a fixed amount is moved automatically from your checking or savings account into your investment.
It’s dollar-cost averaging with the decision-making removed, which over time means buying more shares when prices are low and fewer when they’re high. The minimums are modestly set at $1,000 to start and $100 a month per fund.
No plan can guarantee a profit or protect against loss in a declining market, and you should consider whether you’re able to keep contributing through periods of falling prices. But if the last 36 years taught us anything, it’s that the investors who did best weren’t the one with the sharpest forecasts. They were the ones who never stopped participating.
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The S&P 500 Total Return Index is a variation of the standard S&P 500 stock index that measures both stock price changes and the reinvestment of all cash dividends.
A program of regular investing doesn’t assure a profit or protect against loss in a declining market. You should evaluate your ability to continue in such a program in view of the possibility that you may have to redeem fund shares in periods of declining share prices as well as in periods of rising prices.
Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 6/30/2026.