Wells Fargo/Gallup: Investor Optimism Rises to Highest Level in More than Two Years

More Than Half of U.S. Investors Say They Haven’t “Personally” Benefited From Stock Market Rise
25% of Retirees Doing “Worse” Than Expected in Retirement
47% of Retired Investors Say Saving for Retirement Should Be “Mandatory”

CHARLOTTE, N.C. - June 20, 2013

The Wells Fargo/Gallup Investor and Retirement Optimism Index rose to +43, a surge of 12 points since March and the highest level in two and a half years. Investors are more optimistic about their ability to maintain incomes over the next 12 months. Optimism is especially high among non-retired investors at +45, the highest in two and a half years. Optimism also increased among retired investors, up 25 points since March to +32.

Investors Split On Whether Stock Market Benefits Average American
Despite higher optimism, over half of investors (54%) say they have not “personally” benefited much from the stock market’s rise: 33% say they’ve benefited “a little” and 21% say they haven’t benefited “at all.” About four in 10 investors (43%) say they have “personally” benefited “somewhat” or “quite a lot” from the stock market’s increase. Investors are almost evenly divided on whether the rising stock market helps the “average” American “by increasing the value of pension funds and 401(k) accounts.” Forty-nine percent say market increases benefit the “average” American while 47% do not. The median age of the non-retired investor is 46 and the retiree is 69; the Index survey was conducted by telephone between May 16 and 27, 2013.

“Investors are ambivalent about whether the rising stock market benefits them. History shows that investors who save and invest regularly based on a plan do benefit from rising stock market values, but at this point, most average investors don’t see a strong connection between the markets and their financial well being,” said John Papadopulos, president of Wells Fargo Retirement.

Real estate is cited by 35% of non-retired investor as their top investment choice for investing with a ten-year horizon out of bonds, equities, gold and savings accounts, while 45% of retired investors say stocks would be their top choice.

In the second quarter, 87% of investors say they made “no changes” to their stock market allocations, while 10% increased stock market investments. Of those who did not invest more in the stock market, about half (49%) say they didn’t because they are a “long term investor” and “not inclined to change” and a third of investors (29%) say they did not increase investments due to “a lack of resources.”

Two-thirds of investors say they foresee a market correction this year, but 80% say this has not impacted their stock allocations.

More Planning for Retirement; Some Retirees Doing Worse Than They Expected
Thirty-eight percent of all investors attest to having a written plan for retirement, which is up significantly from 32% a year ago. Forty two percent of retirees attest to having a written plan versus 37% of non-retired investors. A majority – 86% -- of those investors who indicated they have a written plan say they’ve reviewed their plan in the last year.

A quarter of all retirees surveyed say their life in retirement is “somewhat worse” or “much worse” than what they expected. The number is higher – 31% -- for retirees who say they don’t have a written plan for retirement. On the flip side, 42% of retirees who have a written plan say their life is “much better” in retirement than they would have expected.

Among all investors, 43% think saving for retirement should be mandatory for working Americans while 56% do not agree with this measure. Forty-seven percent of retired investors believe saving for retirement should be mandatory as compared to 42% percent of non-retired investors.

“Retirees who talk about life in retirement being ‘worse’ than they anticipated is telling. Their assessment drives home the point that planning and saving make a meaningful difference in how retirement will turn out,” said Papadopulos.

Higher Taxes and Washington Effect on Wall Street
Investors say the top three conditions “hurting” the investment climate “a lot” are a politically divided federal government (73%), followed by the deficit (67%) and unemployment (55%).

Almost three-quarters (73%) of investors believe they will pay higher federal taxes in retirement and 90% say this will make it more difficult for them to live comfortably in retirement. Sixty percent of investors are either “somewhat worried” to “extremely worried” that their federal taxes will increase over the next 12 months and yet a minority – 38% -have put money in a Roth IRA.

Investors are almost split on whether the Federal Reserve will be able to manage the transition to higher interest rates without doing “serious harm to the economy.” Forty six percent think the Fed will be successful while 43% think the economy will suffer great harm when policy changes.

The Value of the 401(k) plan to Non Retired Investors
Sixty-six percent of non-retired investors say their employer offers a 401(k) plan and of those who have access to a plan, 90% are participating. Fifty-two percent of non-retired Americans say if they did not have a 401(k) plan, they’d save less for retirement while a third said they would save the same amount. Investors also seem content with the investment choices in their 401(k) plan with 76% saying their plan offers them the right amount of choices.

Among non-retired investors, 58% say their major source of retirement funding will be a 401(k) plan as compared to 20% of currently retired investors. Social Security and pensions are cited as the major sources of funding for retirees; 47% of retired investors say the 401(k) plan is not “a source at all” of their retirement funding.

“The 401(k) plan plays an absolutely critical role in helping non-retired Americans to save for their own retirement and also have diversified exposure, which will help their investments grow,” added Papadopulos.

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 May 16-27, 2013 by telephone. The sampling for the Index included 1,426 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. About two in five American households have at least $10,000 in savings and investments. The sample size is comprised of 74% non-retired and 26% retirees. Of total respondents, 58% had reported annual income of less than $90,000 and 42% of $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 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. WBR includes Wells Fargo Advisors, the third-largest brokerage in the U.S.; Wells Fargo Private Bank, serving high-net-worth individuals and families; Abbot Downing, serving ultra-high-net-worth families; and Wells Fargo Retirement, which manages $279 billion in institutional retirement plan and pension assets for 3.7 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 & Company (Twitter @WellsFargo)
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.4 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, and the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With more than 270,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2013 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.

Media
Amy H. Jones
704-383-4995
Amy.hylandjones@wellsfargo.com

Media
Allison Leong
212-350-3824
allison.chin-leong@wellsfargo.com