Wells Fargo/Gallup: Investor Optimism Loses Most of Second Quarter Gains Due to Stock Market Concerns

Four in Ten Pre-Retired Investors Fear Repeat of Financial Crisis

69% of Investors Say Slow Growth Economy Will Be Norm for Lifetime

73% Expect U.S. Retirement Crisis in Next 20-30 Years

CHARLOTTE, N.C. - September 13, 2013

The Wells Fargo/Gallup Investor and Retirement Optimism Index fell 10 points in the third quarter to +33, down from +43 recorded in May. Among retired investors, third quarter optimism has fallen 18 points since May to +14, but optimism among non-retired investors has waned only slightly in the third quarter, falling five points since May to +40. Answers related to questions about the stock market and inflation showed the greatest decline in optimism and contributed to the overall Index dip.

Five years after Lehman Brothers filed for bankruptcy, setting off the 2008-2009 global financial crisis and recession from which the U.S. economy has still not fully recovered, four in 10 non-retired investors (41%) say they are “extremely” or “very worried” about a repeat of this event in their retirement years, surpassing concerns about having a lower standard of living (28%), running out of money (26%) or having to work in retirement (25%). In addition, more than two-thirds of investors see a “slow” or “non-growing” U.S. economy for their lifetime as the norm.

“Over the summer, investors watched rising mortgage rates, a volatile stock market and stubborn unemployment figures – all of which understandably impact optimism. What is so striking to me is the fact that five years after the market collapse, non-retired investors harbor significant concerns about a repeat financial crisis. The past continues to color their view of retirement, and whether the stock market is a place where they can invest and grow savings,” said Joe Ready, director of Institutional Retirement and Trust at Wells Fargo.

Investor Wariness Prevails, Affecting Retirement Confidence
A majority (69%) of investors say this year’s stock market increases do not make them any “less fearful about sustained losses” if the market were to fall similar to the 2008-2009 downturn. Fifty-nine percent of retired and 51% of non-retired investors say they haven’t seen a “noticeable increase” in their retirement account values as a result of stock market increases.

Only 14% say the stock market increases have made them feel “a lot” or “somewhat” more confident about their retirement future.

Perhaps more evidence of investor ambivalence about the stock market is the fact that on average, retired investors estimate that 39% of all their assets, not including cash or savings accounts, are actually invested in stocks or bonds. For non-retired investors the figure is 34%.

In the poll, investors were asked what would encourage average American investors to invest in the stock market: 60% - the highest percentage - said lower unemployment and a stronger economy would make the stock market more attractive. This factor was followed by 41% who said a “greater personal understanding of the stock market.”

“According to the poll, the average investor is not highly invested in the market in either equities or bonds, and it appears that a more stable economy with better employment prospects would encourage more participation,” added Ready.

Majority Foresees Gloom for U.S. Retirement
One of the more striking indicators in the poll is how troubled investors feel about the future retirement state for Americans. Almost three-quarters (73%) of investors believe “the U.S. is headed for a major retirement crisis in the next 20 to 30 years that will result in large populations living at a far reduced standard of living, or at the poverty line.”

Widespread agreement with the gloomy retirement scenario is seen broadly among both retired (69%) and non-retired (75%) investors, as well as across other subgroups of investors, such as by gender, income, and education.

Investors Speak Out on Key Washington Issues
In addition, investor confidence in the Fed’s ability to manage the low interest rate policy has slipped with half of investors saying that low interest rates are creating a bubble that will cause “a lot of harm to the economy when it crashes,” up from 43% in May.

Asked which of two approaches to handling the looming debt ceiling deadline Congress should take, a slight majority, 52%, say that given the fragility of the economy, it is most important that Congress avoid a battle over raising the debt ceiling and “avoid shutting down the government.” Less than half, 45%, think it’s more important Congress use the debt ceiling debate and federal budget process to limit federal government spending, even if it results in a government shutdown.

The Bright Side: Pre-Retirees Exhibiting More Planning and Knowledge About Preparing for Retirement
The percentage of pre-retirees reporting they have both developed a specific financial plan to reach their retirement and investment goals, and have written that plan down , has climbed to 39% in August, from 37% in May and 29% in March. Similarly, the percentage saying they have taken the time to calculate a good financial estimate of how much they will need to save now to retire comfortably -- as opposed to guessing -- is now 60%, up from 53% in May and 45% in March.

Along with this positive trend for retirement preparation, a majority of investors, (84%), rate both “the time in your life at which you began to save for retirement” and “how much you save each year” as “extremely” or “very important” factors in determining whether you will save enough to live comfortably after retirement. Somewhat fewer consider selecting the right investment funds (75%), the amount of investment gains made each year (70%), or having low fees on investment funds (62%) as being important.

Taken together, Ready said, “The findings indicate investors understand they will need to save their way to a secure retirement, not merely invest their way there; and they are taking more responsibility for their savings through better planning.”

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 August 14-21, 2013 by telephone. The sampling for the Index included 1,018 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 73% non-retired and 27% 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 median age of the non-retired investor is 48 and the retiree is 69.

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. Wells Fargo perspectives are also available at blog.wellsfargo.com .

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.

Leslie Ingberg
612-667-0265 leslie.ingberg@wellsfargo.com

Allison Leong