Workers Are More Pessimistic Investors Than Retirees

Retirees feel more optimistic about their retirement security than current workers.

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Persistent unemployment, high energy prices, and the budget deficit have dampened the mood of investors. Retirement savers are feeling considerably less optimistic about their investments than they did earlier this year, according to a Gallup survey of 1,099 investors with savings and investments of $10,000 or more commissioned by Wells Fargo.

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The investor optimism index fell from 42 in February to 33 in May. The index hit a record low of -64 in February 2009, but registered 95 in May 2007 before the financial crisis.

Only about half of the investors surveyed (53 percent) say now is a good time to invest in the financial markets, down from 62 percent in February. Respondents say the factors hurting the investing climate are the price of energy (79 percent), the federal budget deficit (75 percent), and the unemployment rate (67 percent).

Retirees, however, are not feeling the same pessimism about the financial markets as workers. While optimism among current employees fell from 35 in February to 24 in May, retirees maintained a consistent and much higher level of optimism of 61 in both polls. “It is striking to see that retirees in the U.S. have maintained consistent optimism levels over the past quarter, with the major slide in sentiment concentrated among working Americans who continue to face the pressure of supporting day-to-day expenses in the midst of trying to plan for their future,” says David Carroll, head of wealth, brokerage, and retirement services at Wells Fargo. The average age of the workers surveyed is 45 and that of the retirees is 69.

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The survey suggests that retirees feel more optimistic about the financial markets because their income sources are more secure than those of current workers. Retirees largely depend on employer-sponsored pensions and Social Security for their retirement income. Current workers expect to rely on their own savings in retirement and face many obstacles to saving such as high unemployment and stagnant wages. Many of the retirees surveyed say Social Security (52 percent) and a traditional pension (46 percent) are a major source of retirement funds, but only 37 percent consider a 401(k) a primary source of retirement income. In contrast, 65 percent of workers expect to rely on their 401(k) investments in retirement. Far fewer workers are counting on traditional pensions (33 percent) or Social Security (30 percent) to be a major source of retirement funding.

The majority of workers (63 percent) say they have a 401(k) account they have contributed to. Most of these retirement savers say their employer matches some part of their contributions (72 percent), and that this match keeps them contributing or motivates them to save more than they otherwise would (64 percent). Some 55 percent of current workers are planning to save the same amount for retirement that they did last year, while 36 percent think they will be able to boost their savings rate this year.

Many workers (58 percent) also see their home as an investment asset that will help fund retirement. These investors say their home will provide them a place to live in retirement (42 percent) or function as an asset they can sell for retirement funds (39 percent). Almost a third of workers (31 percent) say they would consider renting throughout their retirement.

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Workers admit that there are many factors beyond their control that could have a major impact on when they are able to retire including the cost of healthcare (72 percent), inflation (62 percent), and the price of energy (60 percent).

Twitter: @aiming2retire