Wells Fargo/Gallup: Investor Optimism Holds Steady at Seven-Year High

  • 4 in 10 Americans “more optimistic” about the economy in next 12 months post-election
  • 7 in 10 investors believe they could save an additional median of $250 a month
  • Slight majority of non-retired investors (52%) choose a 401(k) over a pension, if given a choice

CHARLOTTE, N.C.--()--Despite stock market volatility this fall, the Wells Fargo/Gallup Investor and Retirement Optimism Index held steady in the fourth quarter, registering +48 in November, similar to the +46 measured in the third quarter. Retiree optimism surged, rising 19 points to +54, driven by their more upbeat view of the economy than in prior quarters. Optimism among non-retired investors waned slightly, registering +46 in the fourth quarter, versus +50 in the third quarter. Overall investor sentiment reflected a more positive outlook about personal financial situations rather than the broad economy.

“a 401(k)-type plan that you control and invest in, and which the company may contribute to, with the payout dependent on your plan’s performance”

The overall Investor and Retirement Optimism Index is now the highest it has been since 2007, following several years of gradual, steady increases. The index is registering a value that is double what it was a year ago, and significantly higher than in November 2012, when it was -8. Still, it remains well below its +178 high point recorded in January 2000.

In a new question, investors were asked if the results of the November elections make them more optimistic about the economy: 43% say they are “more” optimistic, 29% say they are “less” optimistic and 28% say the elections have generated “no impact” on their outlook.

“While moving in the right direction, investor optimism and outlook regarding the economy are recovering at a snail’s pace rather than roaring back. Another sentiment we see in this poll is a mixture of views on the availability of funds to save for retirement. A majority say they could save more on a monthly basis but, at the same time, a majority also thinks the top reason Americans struggle to save for retirement is the pressure of day-to-day bills. There are two realities people are dealing with as our country moves forward,” said Joe Ready, director of Wells Fargo Institutional Retirement and Trust.

The survey of 1,009 investors was conducted November 14-23, less than a month after the midterm elections.

Investor Wariness about Financial Markets Is Easing

More than three-quarters of those polled (78%) currently own stocks, versus 22% who do not. A little more than half (56%) of investors say that “now is a good time to invest” in the financial markets, up from 52% at the start of 2014. As recently as November 2012, the majority of investors said it was not a good time to invest. Notably, all of this quarter’s heightened confidence in the markets comes from retirees, 54% of whom say it’s a good time to invest in the markets, up from 44% last quarter. Non-retirees’ views virtually didn’t change, with 56% in the fourth quarter saying it is a good time to invest.

In a separate question, a minority (45%) of investors rate the financial markets as an “excellent” or “good” way for average Americans to grow their assets, although this is an increase from 37% a year ago. A majority (55%) still rate the markets as “only fair” (38%) or “poor” (17%) for the average American.

“We are still living in an environment where there is much skepticism about whether investing in the stock market is a good way to grow assets. But, at the same time, we know that investors are in the market and they are actively contributing to 401(k) savings plans. Investors realize they control their retirement outcome, which is in part linked to stock market investing over the long term,” said Ready.

Investors Value the Autonomy of a 401(k) plan

More than six in 10 (69%) non-retired investors have access to an employer-sponsored 401(k) plan, and 96% of those with access are actively contributing to their plan. Eighty-six percent say that their employer matches some part of their contributions, and 81% say this is “very important” in helping to save for retirement.

In a new question, non-retired investors were asked whether they prefer a “a 401(k)-type plan that you control and invest in, and which the company may contribute to, with the payout dependent on your plan’s performance” or “a company pension plan that provides you with a guaranteed income in retirement, with the payout dependent on your salary and how long you worked for your employer.” Fifty-two percent of non-retired investors would choose the 401(k), versus 46% who would rather have the pension.

“I find this response to be one of the most enlightening of the study. In the world we live in today, the balance has shifted in terms of people viewing the 401(k) plan as the preferred vehicle for saving over a pension. Yes, it requires more work from the participant, but people like the flexibility and the autonomy the workplace plan provides.”

Non-retired investors say that after healthcare benefits, a retirement savings plan such as a 401(k) is the most important benefit their employer provides (61%), exceeding paid time off or sick leave (23%), life insurance (5%) and stock options (4%).

Investors make it clear that they do not want to cede all control over certain actions involving a 401(k) plan. While three-quarters would be in favor of a new employer automatically enrolling them in a 401(k) plan at the start of their employment, and 66% would want their employer setting up automatic increases for their contributions, fewer than half would favor their employer automatically rebalancing their investments each year (44%) or automatically making age-appropriate investment choices for them (41%).

Most employed investors with a 401(k) plan do rely on advice for the plan but are finding it from outside sources. About one in four (27%) say they rely on a professional advisor outside of work, and another 39% rely mainly on themselves or a friend or family member for help. Just 22% say most of their advice comes from the financial firm that runs their 401(k) plan, and 11% say they seek advice from their company’s benefits department or another financial professional where they work.

“People seek advice about their 401(k), and the industry needs to make it easier for participants to access advice. Investors rely on these plans and want to talk to people who can help them understand a proper savings rate, investment diversification, and concepts like longevity risk and income management. We have to be much more proactive as an industry in helping them make the right choices for their future,” added Ready.

Most Investors Could Save More, but Day-to-Day Bills Are a Major Pressure

The poll also offers insight into whether people are saving more. About a third (32%) of investors says they have increased their savings for retirement in the last 12 months, while about two-thirds have not. At the same time, 9% of non-retired investors — including 14% of those aged 18 to 39 – are not saving for retirement.

While about a quarter of non-retired investors say they could not possibly save any more each month, 69% believe they could save more. Among this group, the median additional amount they estimate they could save each month is $250, with 31% estimating they could save an additional $400 or more each month.

Among those who are saving, the average age non-retirees say they started saving is 29 — a decade into adulthood, and a good five or more years after most college graduates start working. Four in 10 (45%) non-retirees started saving at age 30 or older.

According to Ready, “It is heartening that about half of investors embraced the discipline of saving in their 20s, and I’d like to see that number increase. We cannot emphasize enough the value of starting early to save for retirement — even if it is a small amount. Delaying savings will have negative consequences to the outcome of a retirement nest egg.”

Who’s to Blame for Lack of Retirement Savings?

When asked how much they blame various factors for why Americans aren’t saving enough for retirement, a majority (80%) of investors say it comes down to Americans “delaying” the process of saving for retirement and that Americans are having a hard time paying the day-to-day bills.

In addition, many investors are clearly counting on Social Security to supplement their personal savings and investments in retirement. When asked if they would be motivated to save more if they knew they would not receive Social Security money when they retire, more than half (54%) say they would be motivated to save either “a lot more” or “a little more.” Just 44% say that scenario would not make a difference in how much they save.

A lack of savings can’t necessarily be pinned on people taking out loans or withdrawals from their 401(k) plans. Relatively few workers who participate in their employer’s 401(k) report that in the past five years they have taken out a 401(k) loan (16%). Even fewer, 9%, have taken an early withdrawal from the plan. However, 21% of investors with a 401(k) have done at least one of these things, including 5% who have done both.

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 November 14-23, 2014, by telephone. The Index includes 1,009 investors randomly selected from across the country with a margin of sampling error of +/- three percentage points. For this study, the American investor is defined as an adult in a 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 71% non-retired and 29% retirees. Of total respondents, 60% had reported annual income of less than $90,000 and 40% 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 median age of the non-retired investor is 46 and the retiree is 68.

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 & Company (Twitter @WellsFargo)

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.6 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 8,700 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.

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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Release Summary

The Wells Fargo/Gallup Investor and Retirement Optimism Index registered at +48 in November and is now the highest it has been since 2007.

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