Wells Fargo/Gallup: Renewed Investor Optimism in First Quarter Non-Retired Americans Significantly More Optimistic Than Retired Americans
35% of Retired and 46% of Non-Retired Investors Fear They “Will
Outlive Their Money” Due to Low Interest Rates 71% of Non-Retired Americans Worry About Paying Higher Federal
Taxes In Retirement
U.S. investor optimism rose to +31 in March, up from -8 recorded in
November 2012 according to the quarterly Wells Fargo/Gallup Investor and
Retirement Optimism Index. The overall rise in optimism is due to a
surge among non-retired Americans whose sentiment rose from -8 in
November 2012 to +38 this spring. Retired Americans are not nearly as
optimistic at +7, which is up from -5 recorded last November. The
30-plus point difference in optimism between retired and non-retired
comes after six quarters of closely aligned sentiment between the two
groups of investors. The median age of the non-retired investor is 46
and of the retiree is 70.
Half of investors (51%) say now is a “good time” to invest in the
financial markets, up from 39% from last quarter and now at the same
levels as February 2012. Fifty-four percent of the non-retired say this
is a “good time” to invest while less than half (43%) of retired
investors hold this same view. The survey was conducted between March 14
and 24, 2013 by telephone interviews.
Despite the strong performance of the stock market in the first quarter
2013, 85% of investors say they “made no changes” to their investments
in the stock market. Ten percent of investors increased their stock
market investments during the first quarter 2013 (6% of retired and 12%
of non-retired investors). In the first quarter 2013, the S&P 500 rose
143 points, or 10%, from the fourth quarter 2012.
“The emerging optimism is encouraging, but the disparity in optimism
between the non-retired and retired is notable. The lack of action on
the part of investors during the first quarter rally shows that people
stayed the course and didn’t have a knee-jerk reaction that caused them
to change their investment allocations,” said Laurie Nordquist, director
of Wells Fargo Institutional Retirement and Trust.
Low Interest Rates Have a Big Effect
Half of retired investors (50%) say the low interest rates have done “a
great deal” or “quite a lot of harm” to savers and investors as compared
to 25% of non-retired investors. When asked if the benefits of low
interest rates have “outweighed the costs,” 69% of non-retired investors
agree, but this falls to 51% of retired investors. Thirty-five percent
of retired investors and 28% of non-retired investors say that low
interest rates have caused them to “put money in investments that they
might have avoided.”
“In general, investors think low interest rates have had a positive
effect but at the same time, they seem to be more of a burden to retired
Americans today who are living on a fixed income. Low interest rates
seem to become more challenging when we ask non-retired investors to
think about their effect on their future retirement,” added
Nordquist.
Nearly half of all investors (47%) say today’s low interest rates will
make them live “less comfortably” in retirement —45% of retired and 48%
of non-retired investors. Forty-three percent of all investors — 35% of
retired and 46% of non-retired — fear low rates will mean they will
“outlive their money” in retirement. One in three non-retired investors
(33%) say low interest rates will cause them to “delay” retirement.
However, three in four investors (74%) see low interest rates having a
positive impact on housing. In the past two years, 33% have taken
advantage of the rates and refinanced their home – 39% of non-retired
and 14% of retired. For those investors who refinanced, 43% say they did
so to reduce the number of years of their mortgage and 32% said they
saved the money.
Majority of Investors Worried They’ll Pay Higher Taxes in Retirement
Sixty-eight percent of investors — 59% of retired and 71% of the
non-retired — are worried that they will have to pay higher federal
taxes in retirement and will have a more difficult time living
“comfortably” in retirement. As a result, 39% say their worry over
higher taxes has made them “more likely to seek after-tax investments,”
but 58% say they have not.
“Traditionally, retirement has been a time when you might hope for lower
taxes, but this is not the case right now. I hope that people will think
about taxes more proactively in the context of overall retirement
planning,” said Nordquist.
Half of all investors say they supported the suspension of the payroll
tax holiday in order to provide more funds to Social Security. One in
three (35%) say the suspension of the payroll tax hike has forced them
to reduce their overall spending, and a similar percentage (32%) say it
has forced them to reduce the amount they are saving for retirement.
In terms of public policy, 59% of investors in this survey say that
they’d like to see political confrontations in the nation’s capital come
to end as opposed to potentially “getting their way" on future
government spending, tax policy and federal budget deficits.
Sixty-two percent of investors say recent political confrontations have
had a “major negative” impact on the overall economy, 55% say a “major
negative” impact on business confidence, and 53% say a “major negative”
impact on consumer confidence. Most (88%) say a politically divided
federal government hurts the investment climate, with 70% saying it
hurts “a lot.”
A Very Optimistic Retirement Outlook
American investors are optimistic about life in retirement with 61% of
non-retired investors saying they have “no worries” about being
“unhappy” in retirement. Sixty-nine percent of retired investors express
the same lack of worry.
A third (29%) of non-retired investors say they have a written plan for
retirement, down from 34% last quarter. Over half of investors say their
retirement calculations are “a guess.”
Two in three investors (66%) — 56% of retired and 70% of non-retired —
say they feel “little or no control” in their ability to build and
maintain their retirement savings in the current environment.
More than half (65%) of investors say they have a 401 (k) plan (44%
retired and 72% of non-retired investors). Among those with a 401(k)
plan, 30% say the new fee information was something they “paid attention
to,” while 70% say they have paid “little” to “no attention” to the new
information about fees that has been published in the last year. Sixty-
two percent say the new fee information has had “no impact” on the way
they manage their 401(k); however, 37% say the new information had an
impact.
Over half (56%) investors say the rising stock market has had either a
“major” to a “minor” positive impact on their confidence in the economy.
One fifth of investors say the rising stock market has had “no impact”
on their perception of the economy.
Similarly, 55% of investors say the rising market has had a “major” to a
“minor” positive impact on their ability to retire, while 33% say the
rising market has had “no” impact on their ability to retire.
About the Wells Fargo-Gallup Investor and Retirement Optimism Index
These findings are part of the Wells Fargo-Gallup Investor and
Retirement Optimism Index, which was conducted March 14 - 24, 2013
by telephone. The sampling for the Index included 1,035 investors
randomly selected from across the country with a margin of sampling
error is +/- three percentage points. For this study, the American
investor is defined as any person who is head of a household or a spouse
in any household with total savings and investments of $10,000 or more.
About two in five American households have at least $10,000 in savings
and investments. The sample size is comprised of 74% non-retired and 26%
retirees. Of total respondents, 64% had reported annual income of less
than $90,000 and 36% of $90,000 or more. The Wells-Fargo Gallup Investor
and Retirement Index is an enhanced version of Gallup’s Index of
Investor Optimism that provides its historical data.
The Index had a baseline score of 124 when it was established in October
1996. It peaked at 178 in January 2000, at the height of the dot-com
boom, and hit a low of negative 64 in February 2009.
About Wells Fargo Wealth, Brokerage and Retirement
Wells Fargo Wealth, Brokerage and Retirement (WBR) is one of the largest
wealth managers in the U.S. WBR includes Wells Fargo Advisors, the
third-largest brokerage in the U.S.; Wells Fargo Private Bank, serving
high-net-worth individuals and families; Abbot Downing, serving
ultra-high-net-worth families; and Wells Fargo Retirement, which manages
$279 billion in institutional retirement plan and pension assets for 3.7
million Americans. Wells Fargo Advisors is the trade name used by two
separate registered broker-dealers and non-bank affiliates of Wells
Fargo & Company: Wells Fargo Advisors, LLC, and Wells Fargo Advisors
Financial Network, LLC (members SIPC).
About Wells Fargo & Company (NYSE: WFC)
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.4 trillion in assets.
Founded in 1852 and headquartered in San Francisco, Wells Fargo provides
banking, insurance, investments, mortgage, and consumer and commercial
finance through more than 9,000 stores, 12,000 ATMs, and the Internet (wellsfargo.com),
and has offices in more than 35 countries to support the bank’s
customers who conduct business in the global economy. With more than
270,000 team members, Wells Fargo serves one in three households in the
United States. Wells Fargo & Company was ranked No. 26 on
Fortune’s 2012 rankings of America’s largest corporations. Wells
Fargo’s vision is to satisfy all our customers’ financial needs and help
them succeed financially.
About Gallup
For more than 70 years, Gallup has been a recognized leader in the
measurement and analysis of people’s attitudes, opinions and behavior.
While best known for the Gallup Poll, founded in 1935, Gallup’s current
activities consist largely of providing marketing and management
research, advisory services and education to the world’s largest
corporations and institutions.
Note: Complete survey results and a chart showing the
index movement are available upon request.
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