Investor optimism at 17-year high; nearly
half of non-retired investors don’t have retirement savings
“number”
The Wells Fargo/Gallup Investor and Retirement Optimism Index
held steady in the fourth quarter at +140, statistically unchanged
from +138 in the third quarter. The index is near its September
2000 high of +147. Three-quarters of non-retired investors in the
survey have a 401(k) plan, and more than half – 57 percent – say
the most valued feature of their plan is the “match contribution
from their employer.” The next most valued feature is the tax
deferral on the money they contribute, which was noted by 33
percent. Forty-six percent say they would “save less” or “stop
saving” in their 401(k) if the tax deferred status of their plan
was taken away, whereas 42 percent say they would “save the same
amount.” The survey was conducted by telephone with 1,015 U.S.
investors Nov. 1–5, 2017, 67 percent of whom are non-retired and 33
percent of whom are retired.
This press release features multimedia. View
the full release here:
http://www.businesswire.com/news/home/20171212005410/en/
Caption: The Retirement Sieve? It’s Hard
for Non Retired Investors to Figure Out What They’ll Need In
Retirement (Graphic: Business Wire)
“The 401(k) plan has evolved into the greatest savings and
investment vehicle that Americans have today to steadily build a
retirement nest egg. Pre-tax savings has a direct impact on the
level of savings that people achieve, and we have to recognize this
as the country contemplates changes in tax policy. The
employer-sponsored 401(k) is critical to allowing working people to
save and invest over time,” said Fredrik Axsater, executive vice
president and head of Strategic Business Segments at Wells Fargo
Asset Management.
Investors are generally optimistic about all seven aspects of
the index, with especially strong optimism about economic growth,
stock market performance and employment. Retired investors are more
optimistic than non-retired, with an optimism index score of +151
versus +135 for non-retired investors.
According to the poll, 72 percent of investors are “somewhat” or
“very optimistic” that they will be able to achieve their
investment goals over the next five years, up from 52 percent of
investors during the same quarter five years ago. Investor optimism
generally tracks with market gains, as the S&P has gained
nearly 100 percent since the fourth quarter of 2012.
Investors value guaranteed income stream in retirement
but are unsure how to achieve it
Nearly all non-retired investors — 98 percent — “strongly agree”
or “somewhat agree” that “it is important to have a guaranteed
income stream in retirement, in addition to Social Security,” and
yet there is confusion about how to get this additional income
stream. Six in ten (61 percent) either “strongly agree” or
“somewhat agree” that they want a guaranteed monthly income stream
that lasts as long as they need it, even if that means “giving up
access to some of their money.” But at the same time, 75 percent of
non-retired investors either “strongly agree” or “somewhat agree”
that they want the freedom to spend their money as they want in
retirement, even if that means they may run out of money “too
soon.”
Investors also are unsure about what products are available to
provide them with a guaranteed income throughout retirement: 49
percent “strongly agree” or “somewhat agree” that they are unsure
about these types of products.
The retirement sieve
More than half of non-retired investors (53 percent) have a
savings “number” in mind for retirement, but 47 percent do not.
Non-retired investors with a specific number in mind say $1 million
(median) is the right objective, although 29 percent say $500,000
or less. Forty-one percent of non-retired investors have a specific
savings number in mind and can also estimate what that sum will
generate annually in retirement, but many of these estimates are
unrealistic. Nineteen percent of non-retired investors have a
savings goal in mind and a somewhat realistic assumption of
withdrawing up 1 to 5 percent of their savings every year
throughout retirement. The rest are unsure about what their annual
draw down would be, or they estimate a number that amounts to more
than a 5 percent annual withdrawal rate.
To put this in perspective, Wells Fargo Asset Management
estimates that even with a five percent inflation-adjusted annual
distribution there is a 20–30 percent risk of running out of money
in retirement, assuming they are invested in a well-diversified
investment portfolio.
Another point in the data: Investors who say they need to save a
target of $1 million or more expect to draw 5 percent per year, on
average, while those who say they need to save less than $1 million
expect to draw an average of 7 percent per year. The latter group
is aiming to save less but to withdraw a larger proportion per year
in retirement.
“Setting a retirement savings goal — even if it’s an estimate —
is a critical step in the process of managing one’s retirement
outcome, but it’s hard to do. Further, it becomes even harder to
try to estimate what one will harvest from savings each year of
living in retirement. This is where our industry must come up with
solutions that allow people to envision their savings needs and
what that translates to in terms of annual draw down in
retirement,” said Axsater.
Some interest in “social impact investing,” especially among
female and younger investors
The survey asked investors about their views on “social impact
investing,” which was defined for respondents as “choosing
investments based on the effect they have on things like the
environment, human rights, diversity and other social values, in
addition to investment returns.” Female investors express more
interest in investing in social impact investments, with 39 percent
“very interested” or “somewhat interested” as compared with 26
percent of male investors. Younger investors appear more interested
in this type of investing, with 39 percent of investors aged 18–49,
“very interested” or “somewhat interested,” compared with 29
percent of investors age 50 and older.
There is encouraging news for employers who want to offer social
impact investments to employees as part of their 401(k) portfolio
options. Forty-four percent of non-retired investors with a 401(k)
say they would “definitely” or “probably” put money in social
impact investments if they had the option in their plan. Moreover,
34 percent of non-retired investors with a 401(k) say that
including social impact investments as an option in a work-place
retirement plan would make them feel “more positively” toward their
employer. Of those non-retired investors who would feel more
favorably about their employer, 53 percent are women and 47 percent
are men. Only 6 percent of investors would feel “more
negatively” toward their employer if these investments were
offered.
Although only 10 percent of investors say they currently have
money in social impact investments, 33 percent of investors say
they are “very interested” or “somewhat interested” in social
impact investments.
Investors are unclear about the performance of social impact
funds in comparison to the market as a whole. Although 37 percent
say social impact investing performs the same as the market
average, 33 percent say these investments perform worse, and 28
percent are unsure. Just 2 percent say these types of investments
perform better. More men (39 percent) than women (27 percent) say
social impact investments will perform “worse” than the market
average.
In the Wells Fargo/Gallup survey, investors were asked to rate
their interest in each of three specific social impact themes.
Seventy-eight percent of investors say they are “very interested”
or “somewhat interested” in protecting the environment, 76 percent
are “very interested” or “somewhat interested” in doing social good
— such as promoting diversity and improving education
— and 74 percent are “very interested” or “somewhat
interested” in focusing on responsible corporate governance,
including “ethics” and “behaviors.”
Investment diversification
When asked their views on the riskiness of investing
internationally, 57 percent say making international investments is
“a little” or “a lot” riskier than U.S. investments. A quarter of
investors (25 percent) see international investing as equal in risk
to domestic investments, and 10 percent say international investing
is “a little” or “a lot” safer than domestic investments.
Investors who view international investing as “riskier” than
domestic investing tend to be older: 64 percent of investors older
than age 50 view international investments as riskier, versus 48
percent of those 18–49. Fifty-three percent of investors who say
investing abroad is more risky say it is because of the “potential
for political instability” in these countries.
"The perception that international investing poses a
higher risk is interesting, and it seems to be age-related,
with older investors more likely to cite political risk as a factor
than younger investors. Political risk exists in foreign countries,
as well as the U.S., presenting a strong case for all investors to
have a well-diversified, global portfolio,” said Axsater.
According to the Wells Fargo Investment Institute outlook for
2018, some international equity markets look more attractive than
domestic markets because the U.S. market is later in its growth
cycle compared with international economies and markets.
About the Wells Fargo/Gallup Investor and Retirement Optimism
Index
These findings are part of the Wells Fargo/Gallup Investor and
Retirement Optimism Index, conducted Nov. 1-5, by telephone. The
index includes 1,015 investors, aged 18 and older, randomly
selected from across the U.S. with a margin of sampling error of
+/- 4 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 U.S. households
have at least $10,000 in savings and investments. The sample
size consists of 67% non-retirees and 33% retirees. Of total
respondents, 41% reported annual incomes of less than $90,000; 59%
reported $90,000 or more. The Wells Fargo/Gallup Investor and
Retirement Index is an enhanced version of Gallup’s Index of
Investor Optimism, which provides the historical trend data. The
median age of the non-retired investor is 47 and the retiree is
68.
The Index of Investor Optimism 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 -64 in
February 2009.
About Wells Fargo Asset Management
Wells Fargo Asset Management, a division of Wells Fargo Wealth
and Investment Management, strives to help clients achieve their
financial goals through top-tier investment options managed by
specialized investment teams that are supported by independent risk
management and backed by superior, collaborative service. With more
than $496 billion in assets under management,* Wells Fargo Asset
Management has 29 autonomous investment teams with specialized
expertise and proven processes; more than 500 investment
professionals; and a global reach with offices and clients around
the world.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified,
community-based financial services company with $1.9 trillion in
assets. Wells Fargo’s vision is to satisfy our customers’ financial
needs and help them succeed financially. Founded in 1852 and
headquartered in San Francisco, Wells Fargo provides banking,
insurance, investments, mortgage, and consumer and commercial
finance through more than 8,400 locations, 13,000 ATMs, the
internet (wellsfargo.com) and mobile banking, and has offices in 42
countries and territories to support customers who conduct business
in the global economy. With approximately 268,000 team members,
Wells Fargo serves one in three households in the United States.
Wells Fargo & Company was ranked No. 25 on Fortune’s 2017
rankings of America’s largest corporations. News, insights and
perspectives from Wells Fargo are also available at Wells Fargo
Stories.
Wells Fargo Asset Management (WFAM) is a trade name used by the
asset management businesses of Wells Fargo & Company. Wells
Fargo Funds Management, LLC, a wholly owned subsidiary of Wells
Fargo & Company, provides investment advisory and
administrative services for Wells Fargo Funds. Other affiliates of
Wells Fargo & Company provide subadvisory and other services
for the funds. The funds are distributed by Wells Fargo Funds
Distributor, LLC, Member FINRA, an affiliate of Wells Fargo
& Company. Neither Wells Fargo Funds Distributor nor Wells
Fargo Funds Management holds fund shareholder accounts or assets.
This material is for general informational and educational purposes
only and is NOT intended to provide investment advice or a
recommendation of any kind—including a recommendation for any
specific investment, strategy, or plan. 307846 12-17
About Gallup
Gallup delivers analytics and advice to help leaders and
organizations solve their most pressing problems. Combining more
than 80 years of experience with its global reach, Gallup knows
more about the attitudes and behaviors of employees, customers,
students and citizens than any other organization in the world.
NOT FDIC INSURED - NO BANK GUARANTEE-MAY LOSE VALUE
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171212005410/en/
MediaAmy Hyland Jones,
704-374-2553Amy.HylandJones@wellsfargo.com
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Sep 2023 to Sep 2024