Half of U.S. investors say a recession will start before 2021,
and a majority say they feel “prepared” for one
Three-quarters say they have planned for retirement, more than
those who planned for their working years
Healthcare is a leading retirement concern and the top voter
issue in 2020 elections
The Wells Fargo/Gallup Investor and Retirement Optimism Index
dropped to 85 for second quarter 2019, down 18 points from 103 a
year ago. Investors are less optimistic than a year ago about
maintaining their household income and reaching their 12-month and
five-year investing goals.
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Investor Optimism Drops 18 Points from a
Year Ago, According to Wells Fargo/Gallup Study (Graphic: Business
Wire)
The Wells Fargo/Gallup Investor and Retirement Optimism Index
measures U.S. investor confidence in the investing climate, based
on a representative sample of U.S. adults with $10,000 or more
invested in stocks, bonds or mutual funds. More than half of
investors — 61% — say the stock market’s recent performance makes
them concerned that the market is “peaking.” The latest poll was
conducted May 6–12, 2019.
More than half of investors (61%) describe the economy as
“booming” or “solid,” but there are concerns that a recession is
nearing: 51% of investors say a recession will begin either later
in 2019 (11%) or in 2020 (40%). However, a clear majority — 66% —
say they are “prepared” for how they will handle their investments
in the event of a recession. This includes 72% of retirees and 64%
of nonretirees.
“It is good to see that two-thirds of investors feel they are
prepared to handle their investments during a recession,” said
Tracie McMillion, head of global asset allocation strategy for
Wells Fargo Investment Institute. “While we do not see a recession
in the near term, in many ways we are still recovering from the
last one — which left a deep scar on many investors. This sense of
preparedness is a positive sign.”
Investors plan more for retirement than their working
years
The study found that three in four investors (75%) say they have
put “a lot” or “a fair amount” of thought into achieving their
financial, family and lifestyle goals in retirement. In contrast,
fewer than half of investors — 46% — say they have given the same
thought to planning their life in their working years.
“It’s fascinating that investors have given so much more thought
and planning to their retirement years than to their working years.
Those working years are the ones when people are making lots of
decisions about work, raising families and buying homes, and
planning could be helpful,” said McMillion.
The poll found a gender gap in planning the working years: 52%
of men versus 38% of women say they have given “a lot” or “a fair
amount” of thought since the start of their working years to how
they would achieve their work, financial, family and lifestyle
goals during this phase of life. By contrast, there is no
significant difference between men and women in planning for
retirement, with 77% of men and 73% of women giving it considerable
thought.
Greatest retirement curveball? Healthcare looms large
The poll asked nonretirees which of five possible factors causes
them the most difficulty when planning for retirement. Not knowing
how much money they will need to maintain their standard of living
(29%) ranks No. 1, nearly a tie with No. 2 healthcare (26%). Not
knowing how long they will live (20%) came in third.
Twenty-one percent of investors say they are “highly confident”
they will have enough money to maintain their preferred lifestyle
in retirement. Just over half, 53%, are “somewhat confident” about
their retirement, and 26% are “not too confident” or “not confident
at all.”
Notably, healthcare is investors’ top issue when looking ahead
to the 2020 elections, with 76% saying the candidates’ positions on
this topic will be “very important” to their vote. Social Security
(70%) and the economy (69%) are close second and third election
issues.
“Healthcare is an unknown cost for many, and it becomes even
more of a concern as people age and try to factor those costs into
retirement planning,” said McMillion.
How investors use “catch up” strategies to enhance retirement
savings
The most common step non-retired investors say they are doing to
catch up on their retirement savings is paying off high-interest
debt (80%). A little more than half of investors (54%) say they are
increasing the amount they are saving, roughly tied with deciding
to retire later than their preferred retirement age (52%). Less
common actions are cutting way back on daily expenses (38%), making
catch-up contributions (32%), downsizing their home (13%) and
working a second job (12%).
Four in five non-retired investors report having a 401(k)-type
retirement savings plan. However, when this group is asked how much
they plan to save this year, they fall far short in deferring the
allowable maximum savings. Across all age groups, 18% of investors
surveyed plan to save the maximum allowed savings for their age. On
average, investors under 50 are planning to save $8,969 in their
401(k) this year, just under half the maximum allowable amount of
$19,000. Investors who are 50 and older are planning to save an
average $10,761 in their 401(k) this year, less than half the
maximum allowable contribution of $25,000.
Fewer than one in five investors under age 50 (19%) and 16% of
investors 50 and older say they are planning to save the maximum
allowable amount for their age group this year.
Investors say now is a good time to invest, but not to
spend
Nearly two in three investors (65%) say that now is a good time
to invest in the financial markets, consistent with the 64% to 68%
range seen in the poll since the start of 2018. About half (53%)
say the rise in markets makes them feel more confident about their
retirement savings. Yet fewer than half report that the rise in
markets makes them feel more confident about spending more money
(44%) or making major purchases (40%).
Investors as a whole report having an average 44% of their
savings invested in stocks. When asked to think ahead to their
portfolio at age 80, investors estimate they will have just 26%
invested in stocks at that time. Notably, there is virtually no
difference between the estimates of current stock exposure given by
retirees and nonretirees. Retirees estimate they currently have 46%
of their savings invested in stocks and nonretirees estimate they
have 44%. However, when looking ahead to age 80 or older, retirees
estimate they will have 33% of their savings in stocks at age 80,
and nonretirees estimate they will have 23%.
“Historically, investors have been advised to shift into a more
conservative portfolio as they move into retirement because they
have less time to recover from market corrections and are often
withdrawing funds for living expenses,” noted McMillion. “With very
low interest rates expected to persist in the bond market, it may
be appropriate for retirees to maintain higher allocations to
equities, but they need to assess the increased volatility risk
that comes with holding equities. Meanwhile, nonretirees may not be
taking full advantage of the growth potential of equities over time
and may need to increase their exposure.”
Recession fears: Who is prepared, and what actions are they
taking?
About half of investors (51%) predict that the next U.S.
recession will occur either sometime later this year or next year.
Two-thirds of investors say they feel prepared for how they would
handle their investments in the event of a recession, but there are
differences by subgroup:
- 77% of men versus 55% of women feel prepared.
- 72% of retirees versus 64% of nonretirees feel prepared.
- 74% of higher asset ($100,000+) investors feel prepared versus
57% of lower-asset investors (less than $100,000 invested).
Nonretirees are not taking major precautions to guard against a
future recession, as only 18% plan to delay a home purchase and 23%
plan to delay retirement. But slight majorities say they are
preparing by taking actions that are good financial practices at
any time. These include increasing their savings (59%) and cutting
back on spending (52%). Some are reducing their stock holdings
(22%) and increasing their bonds (15%), while about half say they
are diversifying their portfolio more and half say they are
increasing their cash holdings.
For retirement insights for every generation, view Wells Fargo’s
digital report Reimagining Retirement.
About the Wells Fargo/Gallup Investor and Retirement Optimism
Index
The results of this Wells Fargo/Gallup Investor and Retirement
Optimism Index are based on a Gallup Panel web study completed by
1,240 U.S. investors, aged 18 and older, from May 6-12, 2019. The
Gallup Panel is a probability-based longitudinal panel of U.S.
adults who Gallup selects using random-digit-dial phone interviews
that cover landline and cellphones. Gallup also uses address-based
sampling methods to recruit Panel members. The Gallup Panel is not
an opt-in panel. The sample for this study was weighted to be
demographically representative of the U.S. adult population, using
the most recent Current Population Survey figures. For results
based on this sample, one can say that the maximum margin of
sampling error is ±5 percentage points at the 95% confidence level.
Margins of error are higher for subsamples. In addition to sampling
error, question wording and practical difficulties in conducting
surveys can introduce error and bias into the findings of public
opinion polls.
For this study, the American investor is defined as an adult in
a household with stocks, bonds or mutual funds of $10,000 or more,
either in an investment account or in a self-directed IRA or 401(k)
retirement account. About two in five U.S. households have at least
$10,000 in such investments. The sample consists of 71% nonretirees
and 29% retirees. Of total respondents, 42% reported annual incomes
of less than $90,000; 58% 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 46 and the retiree is 68.
The Index of Investor Optimism has an adjusted baseline score of
100 from when it was established in October 1996. It peaked at +152
in January 2000, at the height of the dot-com boom, and hit a low
of -81 in February 2009.
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.
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,
investment and mortgage products and services, as well as consumer
and commercial finance, through 7,700 locations, more than 13,000
ATMs, the internet (wellsfargo.com) and mobile banking, and has
offices in 33 countries and territories to support customers who
conduct business in the global economy. With approximately 262,000
team members, Wells Fargo serves one in three households in the
United States. Wells Fargo & Company was ranked No. 26 on
Fortune’s 2018 rankings of America’s largest corporations. News,
insights and perspectives from Wells Fargo are also available at
Wells Fargo Stories.
General Disclosures
Equity securities are subject to market risk which means their
value may fluctuate in response to general economic and market
conditions and the perception of individual issuers. Investments in
equity securities are generally more volatile than other types of
securities.
Wells Fargo Investment Institute, Inc. (WFII) is a registered
investment adviser and wholly owned subsidiary of Wells Fargo Bank,
N.A., a bank affiliate of Wells Fargo & Company.
Opinions represent WFII’s opinion as of the date of this release
and are for general information purposes only and are not intended
to predict or guarantee the future performance of any individual
security, market sector or the markets generally. WFII does not
undertake to advise you of any change in its opinions or the
information contained in this release. Wells Fargo & Company
affiliates may issue reports or have opinions that are inconsistent
with, and reach different conclusions from, this report.
The information contained herein constitutes general information
and is not directed to, designed for, or individually tailored to,
any particular investor or potential investor. This report is not
intended to be a client-specific suitability analysis or
recommendation, an offer to participate in any investment, or a
recommendation to buy, hold or sell securities. Do not use this
report as the sole basis for investment decisions. Do not select an
asset class or investment product based on performance alone.
Consider all relevant information, including your existing
portfolio, investment objectives, risk tolerance, liquidity needs
and investment time horizon.
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version on businesswire.com: https://www.businesswire.com/news/home/20190625005282/en/
Media Allison Chin-Leong, 212-214-6674 Allison.chin-leong@wellsfargo.com
Kelly Reilly,
314-797-9701 kelly.reilly@wellsfargo.com
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