Post-Pension Generation of Working Americans Far Less Optimistic Than Current Retirees
CHARLOTTE, N.C. - March 2, 2011
U.S. investors are now as worried about government finance issues as they are about traditional economic concerns, according to the 2011 Wells Fargo/Gallup Investor and Retirement Optimism Index.
The Wells Fargo/Gallup poll shows that the federal budget deficit has risen to the very top of investor concerns. When asked to rate potential factors affecting the investment climate, the federal budget and unemployment tied as top investor concerns, with 71% of investors polled saying each of these is hurting the investment climate “a lot.”
Following the deficit and unemployment, investors cited the price of energy at 60%, closely followed by “the financial position of state and local governments” at 58% as factors that are hurting the investment climate “a lot.” A majority (51%) of investors cited “a politically divided federal government” as a factor, surpassing concerns about home price values (46%) and the availability of credit (38%).
Overall investor optimism has recovered from the depths of the recession in 2008-2009, yet remains well below pre-crisis levels, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index. As pensions are increasingly replaced by self-funded 401(k) plans for working Americans, the index shows retired Americans are twice as optimistic as the non-retired.
Rising to 42 in February, the Index is up sharply from its all-time low of negative 64 in February 2009, just before the markets reached bottom, but significantly trails the pre-recession score of 90 in February 2007. The Index is based on the results of seven core questions that were asked during telephone interviews conducted by Gallup with 1,007 investors aged 18 and older from Feb. 1 through Feb. 8, 2011.
Gallup began its Investor Optimism Index in October 1996. The February Index marks the start of a Wells Fargo/Gallup partnership to release findings quarterly and to break out indices to show optimism levels for the retired and non-retired. Based on the February data, retirees evidence a score of 61, nearly twice the optimism levels of the non-retired at 35. The mean age of the retired is 69 and the mean age of non-retired is 46.
“As the fourth largest banking institution in the U.S., it is important for us to gauge the issues affecting investor sentiment and it is interesting to see how Federal, state and local budget concerns are now affecting our investment climate,” said David Carroll, Senior Executive Vice President and head of Wells Fargo Wealth, Brokerage and Retirement. “The gulf in optimism between retired and non-retired Americans is also remarkable, reflecting what we believe will continue to be a dominant issue in public discourse for the next decade – the ability of Americans to achieve a financially secure retirement.”
Despite their concerns, 62% of investors say now is a good time to invest in the financial markets.
A Tale of Two Retirement Futures in the U.S.
The poll asked a series of questions that show how working Americans will fund their retirement -- in contrast to today’s retirees -- and found dramatic differences between the retired and those yet to retire:
- Nearly three-fourths (74%) of the non-retired say the 401(k) will be a major source of retirement funding for them, compared to 38% of the retired.
- Only 28% of non-retirees expect Social Security to be a major retirement funding source, compared to 48% of retirees.
- Pensions were listed as major funding sources by 49% of retirees, versus 39% for non-retirees.
While the poll results suggest many Americans see retirement as the individual’s responsibility, only a small proportion has created a written retirement plan to fulfill that responsibility. About a quarter (23%) of the non-retired respondents say they have a “written” plan for retirement.
“When you look at the data and see how people anticipate funding their retirement, we almost have two retirement systems in the U.S. today, with most non-retired Americans in the position of having to plan for their retirement on their own,” said John Papadopulos, head of Wells Fargo Retirement. “We see the complexity and to some extent the stress of living life and planning for retirement as factors in reducing optimism.”
Despite differences in funding for retirement, both the non-retired and retired show similar levels of waning confidence in the stock market as a place for retirement investing: 61% percent of the non–retired say they have either “some confidence” or “little confidence” in the market for retirement investments as compared to 59% of the retired. More than a tenth (11%) of the non-retired say they have “no” confidence in the markets as compared to 16% of the retired.
There are stark differences in the way retirees and non-retired Americans view their ability to achieve common retirement objectives. Among retirees, 61% have a “great deal” or “quite a lot” of confidence that they will be able to fund their healthcare needs in retirement beyond what Medicare covers, compared to only 35% of non-retirees. Similarly, while 62% of retirees are confident they are able to maintain their lifestyle in retirement without working, only 40% of non-retirees think they will be able to do so.
As the integration of Wells Fargo and Wachovia nears completion, Wells Fargo has emerged as one of the largest wealth managers in the U.S., with $1.4 trillion under management. The Wealth, Brokerage and Retirement division includes Wells Fargo Advisors, the third-largest brokerage in the U.S.; Wells Fargo Private Bank, serving high-net-worth individuals and families; Wells Fargo Family Wealth, serving ultra-high-net-worth families; and Wells Fargo Retirement, which manages $231 billion in 401(k) assets for 3.5 million Americans.
Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company.
About the Wells Fargo-Gallup Investor and Retirement Index
These findings are part of the Wells Fargo-Gallup Investor and Retirement Optimism Index, which was conducted February 1-8, 2011. The sampling for the Index included 1,007 investors randomly selected from across the country with a margin of sampling error is +/- four 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. The sample size is comprised of 63% non-retired and 37% retirees. Of total respondents, 68% had reported annual income of less than $90,000 and 32% of $90,000 or more. About one in three American households have at least this amount in savings and investments. 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. The Index 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 nationwide, diversified, community-based financial services company with $1.2 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, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With more than 278,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked #19 on Fortune’s 2009 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.
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 is available upon request.