Nearly half of investors say they would use
potential tax savings to increase savings or investments
Higher interest rates could lure some investors
away from stocks
Half of retirees wish they had thought about
their retirement age sooner
The Wells Fargo/Gallup Investor and Retirement Optimism Index is
at a 16-year high following a 30-point increase from fourth-quarter
2016 to +126 in the first quarter. Investors are now the most
optimistic they have been about the U.S. investment climate since
the dot-com boom in November 2000, when the index was +130.
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Wells Fargo/Gallup: Investor and
Retirement Optimism Index Q1 2017 (Graphic: Business Wire)
The survey was conducted by telephone with 1,007 U.S. investors
Feb. 10-19, just days after the Dow Jones Industrial Average
crossed the 20,000 mark for the first time and as the bull market
was reaching its historic eighth year.
Of the two dimensions of the index, the economic dimension —
measuring investor optimism about economic growth, unemployment,
the stock market and inflation — advanced the most this quarter,
rising 20 points to +46. Most of this came from investors feeling
more upbeat about stocks and economic growth. The personal
dimension — measuring investors’ outlook for their income and
investments — rose 12 points to +80, with slight increases among
all components.
In line with their greater confidence, 60% of investors say now
is a good time to invest in the financial markets. This is up from
52% in late 2016 and is the highest the Wells Fargo/Gallup investor
poll has recorded since early 2011.
Most Investors Not Expecting a Tax Cut
As investors wait for Washington to act on tax reform, more
investors (39%) expect the percentage of income they pay in taxes
to go up in the next few years than expect it to go down (29%).
About a third, 31%, think their tax rate will stay the same.
When asked what they would do with the money if their tax bill
were to be cut by a few thousand dollars, nearly half of investors
(47%) say they would use it to increase their savings or
investments. The next most likely action would be to pay down debt
(24%). Using it to make special purchases or “something else” are
tied at 10%. Just 8% say they would use it for everyday
spending.
“Although it’s great to see investors are optimistic about
financial markets and retirement security overall, it’s especially
noteworthy that seven out of 10 would improve their financial
health through either saving and investing or paying down debt as a
result of a potential tax cut,” said Joe Ready, head of Wells Fargo
Institutional Retirement and Trust. “Saving and investing enough is
the number-one factor that will drive retirement outcomes.”
Higher Interest Rates Could Lure Some Investors away from
Stocks
Prior to the Federal Reserve’s recent decision to raise the
federal funds target rate by 25 basis points, investors were evenly
divided over the effect raising interest rates this year would have
on the economy: A third (32%) said higher rates would be good,
another third (34%) called them bad, and another third (32%) said
they would not make much difference.
In terms of how interest rates might affect their own investing
behavior, 37% of investors say higher interest rates would make
them very or somewhat likely to transfer money out of the stock
market and into more conservative investments. This is up from 23%
two years ago, when Gallup last asked this question.
Retired investors are more positive about the economic impact of
higher interest rates: 37% say they would be good for the economy
while 26% say they would be bad. Non-retired investors tilt the
other way, with 37% believing higher rates would be bad and 31%
good. These differences are consistent with retired investors’
greater reliance on interest income, compared with non-retired
investors’ greater dependence on mortgages and other loans for
which lower rates are preferable.
More Investors Feeling Confident about Their Retirement
Security
The new poll finds 78% of investors, up from 69% in the prior
measurement in 2014, feeling confident they will have enough money
to maintain the lifestyle they want throughout retirement, perhaps
a byproduct of the continued bull market. This includes 31% feeling
“highly confident,” up from 26% in 2014. Meanwhile, the percentage
not confident has fallen from 31% to 22%.
One significant factor plays a role in degrees of confidence:
having a written plan. Forty-three percent of investors with a
written plan for retirement say they are “highly confident” they
will have enough to maintain their lifestyle. Even among investors
with similar asset levels, confidence is higher among those with a
written plan. By contrast, just 23% of investors with no written
plan feel highly confident.
Investors are less worried today than three years ago that they
will outlive their savings in retirement: 36% now vs. 46% in 2014
think this is a real risk. As is typical, a higher percentage of
non-retired (39%) than retired investors (28%) are worried about
outliving their savings.
“Although we are experiencing rising account values and
optimism, it’s important not to underestimate the importance of a
thoughtful strategy and a written plan not only for saving and
investing, but also for drawing down funds in retirement given the
complexities of longevity, taxes, and when to begin Social Security
benefits,” said Ready.
Less Than Half of Investors Have a Written Financial
Plan
Just 37% of non-retired investors and 40% of retired investors
report that they have a written financial plan. This is similar to
what the investor survey recorded in 2015, indicating investors
haven’t made progress in this important area.
Investors with $100,000 or more in investments are more likely
than those with less than $100,000 invested to have a written plan:
48% vs. 26%. Also married investors (42%) are more likely than
unmarried investors (29%) to have a written plan.
“We’ve seen strong evidence around the power of having a written
plan, wherever you fall on the income spectrum. Whether you use a
tool online to construct a plan or work with an advisor, it drives
confidence and helps inform decisions about budgeting and saving,”
said Ready. “It’s hard to know where you’re going without a road
map.”
Few Investors Have Given Sufficient Thought to Retirement
Age
Anchoring one’s financial goals to a specific retirement age is
a key aspect of any well-prepared financial plan. Yet only 28% of
non-retired investors say they have given a lot of thought to the
best age to retire. Another 30% say they have given this a fair
amount of thought. Still, 31% say they have given this only a
little thought and 11% admit they have given a potential retirement
age no thought.
Only four in 10 (39%) non-retired investors age 50 and older say
they have given retirement age a lot of thought. This number drops
to 20% of those under 50 who say they have given it a lot of
thought.
“The actual age you retire is a really important factor in
determining your monthly income and how long it will last. The
sooner you start to plan your retirement age, the more you can
control while you still have a long runway ahead of you to make
adjustments to your strategy,” said Ready.
Which of seven different steps have non-retired investors
taken to help determine their best retirement age?
- 63% discussed it with friends and
family
- 59% estimated their retirement income
using different retirement age scenarios
- 51% manually crunched the numbers
- 50% used online tools to estimate their
retirement income
- 47% talked with a professional
financial advisor about it
- 44% read up on retirement-age
considerations in financial publications
- 30% reviewed their options for
retirement age on the Social Security Administration website
A slight majority of non-retired investors (54%) believe that
knowing the age at which they plan to retire would make a
difference in their financial behaviors today; 45% say it would
not.
The importance of giving early thought to retirement age is
underscored in the responses of retired investors. More than half
of them, 52%, wish they had started thinking about their retirement
age earlier than they did, whereas 46% say they gave themselves
enough time.
About three in 10 (28% of) retired investors were advance
planners, starting to think about their best retirement age before
they turned 40. Another 20% were on track, starting to focus on it
in their 40s. However, more than four in 10 (25%) waited until they
were in their 50s or 60s (16%). Overall, the average age retired
investors say they started thinking seriously about the best age to
retire was 44.
For more information, read Five Ways Rising Interest Rates Could
Affect Investors (PDF) from Wells Fargo Investment Institute.
See also New study: Planners have the edge in retirement saving
on Wells Fargo Stories.
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 Feb. 10-19, 2017, by
telephone. The Index includes 1,007 investors randomly selected
from across the country with a margin of sampling error of +/- four
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-retirees and 29% retirees. Of total
respondents, 44% reported annual income of less than $90,000; 56%
reported $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 69.
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
Wells Fargo & Company (NYSE: WFC) is a diversified,
community-based financial services company with $1.9 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 8,600 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
269,000 team members, Wells Fargo serves one in three households in
the United States. Wells Fargo & Company was ranked No. 27 on
Fortune’s 2016 rankings of America’s largest corporations. Wells
Fargo’s vision is to satisfy our customers’ financial needs and
help them succeed financially. News, insights and perspectives from
Wells Fargo are also available at Wells Fargo Stories.
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170323005445/en/
Wells Fargo & CompanyMediaLeslie Ingberg,
612-667-0265Leslie.Ingberg@wellsfargo.com
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