Optimism holds steady among investors in latest Wells Fargo survey

The Wells Fargo/Gallup Investor and Retirement Optimism Index held steady in the fourth quarter of 2017 at plus-140, statistically unchanged from plus-138 in the third quarter. The index is near its September 2000 high of plus-147.  Three-quarters of non-retired investors in the survey have a 401(k) plan and more than half — 57 percent — say the most valued feature of their plan is the “match contribution from their employer.” 

The next-most-valued feature is the tax deferral on the money they contribute, which was noted by 33 percent. Forty-six percent say they would “save less” or “stop saving” in their 401(k) if the tax-deferred status of their plan was taken away, whereas 42 percent say they would “save the same amount.”

The survey was conducted by telephone with 1,015 U.S. investors Nov. 1-5, 2017. Sixty-seven percent of survey participants are non-retired and 33 percent of them are retired.

“The 401(k) plan has evolved into the greatest savings and investment vehicle that Americans have today to steadily build a retirement nest egg,” said Fredrik Axsater, executive vice president and head of Strategic Business Segments at Wells Fargo Asset Management. “Pre-tax savings has a direct impact on the level of savings that people achieve, and we have to recognize this as the country contemplates changes in tax policy. The employer-sponsored 401(k) is critical to allowing working people to save and invest over time.” 

Investors are generally optimistic about all seven aspects of the index, with especially strong optimism about economic growth, stock market performance and employment. Retired investors are more optimistic than non-retired, with an optimism index score of plus-151 versus plus-135 for non-retired investors.

According to the poll, 72 percent of investors are “somewhat” or “very optimistic” that they will be able to achieve their investment goals over the next five years, up from 52 percent of investors during the same quarter five years ago. Investor optimism generally tracks with market gains, as the S&P has gained nearly 100 percent since the fourth quarter of 2012. 

Investors value guaranteed income streams in retirement but are unsure how to achieve it 

Nearly all non-retired investors — 98 percent — “strongly agree” or “somewhat agree” that “it is important to have a guaranteed income stream in retirement, in addition to Social Security,” and yet there is confusion about how to get this additional income stream. Six in 10 (61 percent) either “strongly agree” or “somewhat agree” that they want a guaranteed monthly income stream that lasts as long as they need it, even if that means “giving up access to some of their money.” But at the same time, 75 percent of non-retired investors either “strongly agree” or “somewhat agree” that they want the freedom to spend their money as they want in retirement, even if that means they may run out of money “too soon.”

Investors also are unsure about what products are available to provide them with a guaranteed income throughout retirement:  49 percent “strongly agree” or “somewhat agree” that they are unsure about these types of products.