Are Pessimists More Prepared for Retirement?

Pessimists choose safer investments, but more optimists have a financial plan

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Having a pessimistic outlook about life can spill over into your retirement plans. Investors who were determined to be pessimists based on a questionnaire are less likely than optimists to expect a comfortable lifestyle in retirement, according to a recent Fidelity Investments study. Those who see the glass as half empty are also less likely to take risks with their nest egg.

Pessimists are twice as likely as optimists to invest with the goal of preserving money (25 percent of pessimists versus 12 percent of optimists) and are willing to accept lower returns, Fidelity found. Optimists, on the other hand, are more likely to seek a balance between preserving their nest egg and investing for returns (39 percent of optimists versus 25 percent of pessimists). When the optimists and pessimists were asked about their gut reaction to recent stock market volatility, significantly more optimists than pessimists said their initial reaction was to stay the course (77 percent of optimists versus 57 percent of pessimists). Twice as many pessimistic investors felt a sense of panic and a desire to pull out of the market (22 percent of pessimists compared to 11 percent of optimists).

But pessimism doesn’t necessarily translate into proactively planning for retirement in other ways, according to the study of 502 relatively affluent married couples age 45 to 72 with a household income of at least $75,000 or investable assets of $100,000 or more. “Pessimists’ concerns are not driving action that could help improve their financial situation and overall confidence levels,” says Joan Bloom, executive vice president of Fidelity Investments Life Insurance Company. Only 15 percent of pessimists have a retirement income plan, compared to nearly twice as many optimists (27 percent). Pessimists are also less likely than optimists to report that both they and their spouse have wills prepared (52 percent of pessimists versus 62 percent of optimists).

Both groups are roughly equally likely to have 401(k)s, IRAs, annuities, and pensions, the Fidelity study found. But optimists and pessimists may think about and use these investment vehicles slightly differently.