Optimism Returning Even Amidst Problems

Northwestern Mutual's Optimism Barometer sees rising consumer outlooks, especially among seniors.

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Do you feel optimistic, America? Perhaps surprisingly, you do, according to some admittedly unscientific results from an online survey sponsored by Northwestern Mutual, the Milwaukee-based life insurance and financial security firm. The nation is only slowly emerging from a recession. We're fighting two wars and struggling with terrorists. Government finances are in a shambles and the passage of healthcare reform has been so divisive that legislators may be safer these days in a bunker than out visiting constituents. So, have the folks in Milwaukee been drinking something stronger than beer?

[See U.S. News's list of the Best Mutual Funds for 2010, and use our Mutual Fund Score to find the best investments for you.] Last year, Northwestern Mutual commissioned research on how Americans were dealing with all the turmoil in their lives. The work was done by Mathew Greenwald & Associates, which does lots of attitudinal work for financial services firms, including the annual retirement confidence surveys for the Employee Benefit Research Institute (EBRI). The American Reality Study found that people had changed their expectations and goals, moving away from a material-centered view of success to one that emphasized family, friends, community, and other aspirations that aligned with older-style American values.

The company also pulled six questions from the study and built an online tool called the Optimism Barometer. People are scored on their answers and receive an optimism grade that the company feels is an accurate reflection of their true attitudes. The original research was conducted in early 2009, when the economy and stock market were still declining. Even then, consumers reflected an underlying if sobering confidence in their own abilities to fashion better long-term futures, said Greg Oberland, a Northwestern Mutual executive.

Since then, people who used the online Optimism Barometer have been posting increasingly positive scores. "We're seeing that optimism is on an upward trend," Oberland says. But the optimism on display reflects a view of the altered future that was identified in the earlier research and which he calls "the new normal." People have come to terms with the economic realities they are seeing, he says. They take responsibility for their actions, and recognize the need to make and follow longer-term plans to achieve their goals.

[See Best Affordable Places to Retire.]

A year ago, only 25 percent of Barometer scores were in the 8 to 10 range (10 is the highest score), the company says. A year later, that figure had risen to 40 percent. Other scores rose as well, and those in the least optimistic group (scoring 0 to 4) currently account for less than 2.5 percent of the total versus 19 percent a year ago. Only about 2,500 persons have used the Barometer, the company says, and notes they do not represent a scientifically selected group.

Barometer scores of persons aged 60 and older were noticeably higher than for younger age groups. “On one hand, older respondents who have seen more economic cycles have higher levels of optimism than younger people who have less experience," Oberland says. "That said, younger people believe more in the power of sheer ambition while older respondents are more cynical of the idea that anything is possible.”

As it turns out, the new normal also has been very good for Northwestern Mutual. Aided by the low interest-rate environment, traditional whole life insurance is relatively more attractive than in the past. And the company has maintained the highest possible financial soundness ratings from Moody's, A.M. Best, and other ratings firms. So, with consumers seeking less risk and more reliable returns, Oberland says, there has been a flight to quality. As a result, Northwestern Mutual's sales of whole life insurance are up 20 percent so far this year, and that's from a stable base that did not fall off during the recession.

[See Growing Older, Getting Mellower, Feeling Good.]