U.S. Investor Optimism Sags; Low Rates Force One in Three Investors to Delay Retirement, According to Wells Fargo/Gallup Poll

The Non-Retired Say Rising Healthcare Costs Have Either “Reduced” Their Ability to Save for Retirement or Will Cause a Delay

CHARLOTTE - June 6, 2012

Overall U.S. investor optimism fell to +24, down from +40 recorded in February, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index. The decline was driven by increased investor pessimism about the future course of the overall economy. The optimism of retired respondents fell to +17, down from +38 recorded in February, a drop of 21 points and down from +61 a year ago. Non-retired Americans recorded an optimism level of +27 versus +41 in February.

One in three investors (33%) say low interest rates will cause them to “delay” retirement. Forty-five percent of non-retired Americans and 34% of retirees fear that current low interest rates may cause them to “outlive” their money in retirement. A little more than a quarter (26%) of non-retired and 19% of the retired say low interest rates will cause them to put money in investments they “might have avoided.” Thirty-two percent of investors think today’s low interest rates are likely to lead to a sharp increase in inflation in the years ahead.

“A year ago, retired investors were three times as optimistic as working Americans and now retirees are less optimistic, which may be attributed to how challenging it is to have any kind of growth in savings. Our questions on interest rates show the impact low rates are having – they are challenging for retirement nest eggs, particularly when core inflation rate growth is about 3% a year and CD rates are yielding less than 1%. Some people may feel like they’re pushing mud up hill,” said Karen Wimbish, director of Retail Retirement at Wells Fargo.

Non-retired investors say lower interest rates are good for consumers and businesses, and the “benefits outweigh the costs” by 73% to 22%. Retirees are more evenly split, with 47% saying “benefits outweigh the costs” versus 43% who do not.

Healthcare – Cost and Quality

The survey shows three in four investors are dissatisfied with the total cost of healthcare in this country. In fact, 80% of all respondents say healthcare is in “a state of crisis” or has “major problems.” Still, nine in 10 investors rate the quality of healthcare they get today “excellent” or “good,” while eight in 10 rate their insurance coverage as “excellent” or “good.”

Over the past year, two in three investors (67%) say their insurance costs increased a lot (23%) or a little (44%). Twenty-nine percent of the non-retired say rising healthcare costs have reduced their ability to save for retirement and forced some to delay retirement (12%).

Planning and Control

Forty-eight percent of investors say now is a good time to invest in the markets, versus 52% in February and 53% a year ago.

More than half of investors (57%) say they feel they have “little” or “no control” in their ability to build and maintain their retirement savings in the current environment.

However, among those with a written financial plan, 82% of non-retired and 92% of retired feel having a financial plan with specific financial goals or targets gives them confidence they can achieve their future goals. But, 28% of the non-retired respondents and four in 10 (42%) of the retired say they have a “written” plan for retirement. The survey found one big difference among the sexes related to planning, which is that 51% of retired women attest to having a written plan versus 32% of retired men.

Men and Women and Shared Financial Planning

Eighty seven percent of male and female investors say they “always” or “most of the time” share the decision to make a “major purchase.” Just about half of men (45%) and women (49%) say they share financial and investment planning decisions, but twice as many men (48%) than women (21%) characterize themselves as “taking the lead” in financial decision making. Two in three men (69%) say they make more money than their spouse or partner, while nearly one in three women (31%) say they earn more.

The study showed big differences between the sexes on tracking and following the market. Almost three quarters of men (71%) say they track the market either weekly or daily versus 44% of women. Fewer than half of women investors (43%) say “now is a good time to invest in the markets” versus 53% of men.

“More women are involved in the day-to-day financial decisions, but less than half say they are sharing in the financial decision making on investments. Based on these responses, it appears that women shy away from long-range decisions like investing, and that translates into preparations for retirement. “Women should become more familiar with the market and the fundamentals of investing – it will serve them over time,” said Wimbish.

Summer Vacation Plans

Two thirds of Americans (66%) say they have taken a vacation and traveled in the past year. Another 18% say it has been 1-2 years since they have had a vacation, while 15% say it has been more than two years. One in five investors (19%) plan to travel more in terms of their summer vacation this year; 15% plan to travel less; 38% plan to do the same for the summer as in the past; and 27% have no summer travel plans. For those planning a summer vacation, about as many (26%) of investors are budgeting more money for this summer as those planning to spend less (28%). Forty-five percent say they will budget the same for this summer as in the past. More women (31%) versus men (24%) say they don’t have any summer travel plans for the summer.

Funding for Retirement in the U.S.

Similar to trends in previous poll results, the May 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:

  • One in five (20%) non-retirees say Social Security will be a major funding source for them in retirement, down from 30% in May 2011, and compared to 47% of retirees.
  • Two in three (64%) of the non-retired say their 401(k) will be a major source of retirement funding for them – down from 70% in February, and compared to 33% of the retired.
  • Thirty-six percent of the non-retired expect pensions to be a major funding source for retirement – up from 32% in February, and compared to 50% of retirees.
  • Thirty-one percent of the non-retired call stock investments a “major source” for funding their retirement – down from 33% in February, and compared to 27% of the retired.

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 May 4–12, 2012. The sampling for the Index included 1,018 investors randomly selected from across the country, with a margin of sampling error of +/- 3 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, 63% had reported annual income of less than $90,000 and 37% had income 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 –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 $1.4 trillion in client assets. WBR includes Wells Fargo Advisors, the third-largest brokerage in the U.S.; Wells Fargo Private Bank, serving high-net-worth clients; Abbot Downing, serving ultra-high-net-worth families and individuals; and Wells Fargo Retirement, which manages $257 billion in 401(k) assets for 3.6 million Americans. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company: Wells Fargo Advisors, LLC, and Wells Fargo Advisors Financial Network, LLC, (members SIPC).

About Wells Fargo (Twitter @WellsFargo)
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 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. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

About Gallup
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