CHARLOTTE - March 7, 2012
Overall U.S. investor optimism has surged to +40, back up to the February 2011 level and a significant jump from -45 recorded in the September poll, according to the February Wells Fargo/Gallup Investor and Retirement Optimism Index.
Seventy-two percent (72%) say they are either better off (40%) or no worse off (32%) than they were nearly four years ago, before the last presidential election, while 27% say they are worse off financially.
Two–thirds (65%) of investors say there is “plenty” of opportunity in the U.S. today to “get ahead” versus one third who say “not much opportunity.” Seventy-one percent (71%) of all investors say they are “better off” than their parents were at the same age. A majority of the non-retired (66%) and the retired (79%) say they are better prepared financially “for retirement” than their parents were at the same age. The average age of retirees surveyed is 68 and that of non-retirees is 45.
Despite their optimism, a majority of investors -- 58% -- say they have “little” to “no” control over their ability to build retirement savings, down from 65% six months ago.
“It’s great to see Americans feeling positive, but it is combined with a sense that saving for retirement is not in their control. We don’t want that to become a self-fulfilling prophecy because retirement preparation is, ultimately, their responsibility, and we want people to embrace this mindset,” said John Papadopulos, head of Wells Fargo Retirement.
The overall index of +40 is also comprised of non-retiree optimism, which is +41, and retiree optimism, which is +38. In contrast, retiree optimism was at –60 in autumn 2011 and non-retired optimism was at –41.
Investors point to a “politically divided federal government” as the most important factor “affecting” the U.S. investment climate right now, with three in four (73%) saying it is “hurting a lot.” Rounding out the top four factors are the federal budget deficit at 66%, the unemployment rate at 62%, and the price of energy including gas and oil at 53%. A year ago, divided government ranked much lower -- 51% -- behind such concerns as the deficit (71%), unemployment (71%), and energy prices (60%).
The February poll shows that 52% of investors say now “is a good time to invest in the markets,” down from 62% a year ago but up from 35% recorded in September.
Opportunity in America Today
Fifty-seven percent (57%) of investors surveyed think their children will be “better off financially” when they reach the age they are now as compared to 41% who think they will not be. Fifty-four percent (54%) of investors think their children will be “better prepared financially for retirement” when they are the same age, as compared to 43% who think their children will not be better prepared.
For the roughly one third (32%) of American investors who see “less opportunity” to get ahead in the future, the top three reasons cited are the high cost of a college education (78%), difficulties in getting a better job (73%), and government “getting in the way” (56%).
Spending and Investing
A majority of Americans (55%) say they enjoy “saving and investing” versus 42% who describe themselves as a person who “enjoys spending money.” Asked about their behavior over the past year, 45% of investors said they have been spending “less money” than they did prior to the recession in 2008; 28% said “more money,” and 27% the “same amount” of money. Of those spending less, 74% said their reduced spending is part of a new normal spending pattern while 24% said it is a temporary change.
In general, 34% of investors say they have been saving and investing more money than they did prior to the recession in 2008, while 31% say they have been saving less money, and 34% say the same amount of money. Of those saving and investing more money, 85% say this is part of a new normal saving and investing pattern. In contrast, just 12% say it is a temporary change.
Almost half -- 49% -- of investors expect their income to increase over the next 12 months. About half -- 52% -- say they will use the added income to increase their savings and investments, 36% will use it to reduce debt, and 11% will use it to maintain their spending. Of the 58% of investors expecting to get a tax refund, 40% say they will use it to increase their savings and investments, 36% say they will use it to reduce debt, and 24% they will use it to maintain their spending. Less than half -- 40% -- of investors say increases in their healthcare premiums have “reduced” their ability to save and invest for retirement.
7% Increase in Written Plans among Non-Retired
While the poll results suggest younger Americans see retirement saving as the individual’s responsibility, few have created written retirement plans. Three out of ten (31%) of the non-retired respondents and just over a third (38%) of those retired said they have a “written” plan for retirement. In February 2o11, 24% of the non-retired attested to having a written retirement plan. Of the non-retired who do have a written plan, 66% said they have either a “great deal” or “a lot of confidence” they “have a good estimate of the money needed to live comfortably” in retirement, versus 38% of those who do not have a written plan or any plan at all.
Among those with a written financial plan, 83% of non-retired and 80% of retired feel having a financial plan with specific financial goals or targets gives them confidence they can achieve their future goals.
Funding Retirement in the U.S.
Similar to the May and September 2011 results, the February 2012 poll found significant differences between how today’s retired Americans are funding their retirements and how those yet to retire expect to do so. Today’s retirees are more likely to depend on employer-sponsored pensions and Social Security, while future retirees expect to rely on their own savings:
- Seven in ten (70%) of the non-retired said their 401(k) will be a major source of retirement funding for them, compared to 33% of the retired.
- Thirty- two percent (32%) of the non-retired expect pensions to be a major funding source for retirement, compared to 48% of retirees.
- Thirty- three percent (33%) of the non-retired call stock investments a “major source” for funding their retirement as compared to 31% of the retired.
Of the non-retired, more than a third (37%) say they are putting more away for retirement; 51% say they are putting away the same, and 11% say they are putting away less, and these percentages are flat with 2011.
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 3-12, 2012. The sampling for the Index included 1,022 investors randomly selected from across the country with a margin of sampling error is +/- three 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 75% non-retired and 25% retirees. Of total respondents, 64% had reported annual income of less than $90,000 and 36% of $90,000 or more. About two in five 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. 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 Wealth, Brokerage and Retirement
Wells Fargo Wealth, Brokerage and Retirement (WBR) is one of the largest wealth managers in the U.S., with $1.3 trillion under management. WBR 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 $236 billion in 401(k) assets for 3.6 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 Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.3 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 270,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 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 are available upon request.
Amy Hyland Jones
Allison Chin Leong