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Poll: Investors planning more for retirement than working years

Investors are planning more to meet their goals in retirement than for their working years, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index.

June 28, 2019

Don’t sacrifice today for tomorrow.

That’s the advice Financial Advisor Florina Shutin of Wells Fargo Advisors gives her clients.

“I encourage them to enjoy life in the present, and be comfortable today, but also plan for retirement, to help ensure they live the lifestyle they’re accustomed to in retirement,” she said. “If you plan well, I believe you are better positioned to do both.”

The latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey, conducted May 6-12 with 1,240 U.S. investors 18 and older, dropped 18 points from last year. In short, investors indicate they are less optimistic than a year ago about maintaining their household income and reaching their 12-month and five-year investing goals.

Two headshots are paired together. Florina Shutin is on the left and Tracie McMillion is on the right.
Florina Shutin of Wells Fargo Advisors, and Tracie McMillion of Wells Fargo Investment Institute

The possible reason for the decline? More than half of investors (61%) fear the stock market is peaking after its record run, and 51% expect a recession sometime later this year or next year. This leaves nonretired investors struggling to balance planning for their lives today and in retirement. However, a clear majority — 66% — said they are “prepared” for managing their investments in a recession. This includes 72% of retirees and 64% of nonretirees.

Among the actions nonretired investors are taking to get ready for a downturn:

  • Increasing savings (56%)
  • Cutting back on spending (51%)
  • Increasing the portion of their investment portfolio in cash (50%)

“While we do not see a recession in the near term, in many ways we are still recovering from the last one — which left a deep scar on many investors,” said Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute. “This sense of preparedness is a positive sign.”

Barriers to retirement planning

The Gallup poll asked nonretirees to rank which of five possible factors made planning for retirement the most difficult. Not knowing how much money they’d need to maintain their lifestyle (29%) ranks No. 1, followed by health care (26%) and uncertainty about how long they’d live (20%).

Healthcare is investors’ biggest concern for the 2020 elections, with 76% saying the candidates’ positions will be “very important” to their vote, followed by Social Security (70%) and the economy (69%).

(see text below)
Source: Wells Fargo/Gallup Investor and Retirement Optimism Index, May 6-12, 2019.

Plan for retirement, but don’t forget the present

While three in four investors (75%) surveyed said they had put “a lot” or “a fair amount” of thought into achieving their financial, family, and lifestyle goals in retirement, only 46% reported devoting the same kind of planning to their working years.

Shutin helps her clients use the Envision® process, an investment planning tool offered through Wells Fargo Advisors, to plan for both their present and future investing goals.

She works with clients who, amid relocation, are juggling short-term goals including buying a car, making a down payment on a new home, and creating 529 college savings plans for children — all while continuing to max out 401(k) contributions at work.

“401(k)s are great, and you should contribute the max, if you’re able, and take advantage of your employers’ match,” Shutin said, “but if you don’t have a disciplined savings plan for the present and specific goals for what you want to achieve now and a plan to help you get there, you can end up contributing everything to a 401(k) and sacrificing the present for the future.

Bar chart titled: Investor thought given to planning each life stage. 75% have planned a lot/fair amount for retirement vs. 46% doing the same during their working years.
Source: Wells Fargo/Gallup Investor and Retirement Optimism Index, May 6-12, 2019.

“It’s important to create the same type of savings program and focus for the present, as you put in a 401(k), for your life and financial goals before retirement.”

The bottom line: Investors should continue to plan for many years of retirement, as most are already doing according to the survey, while also keeping in mind their current investing needs during their working years.

“It’s the working years that bring so many important decisions and life stages — starting and growing a career, relationships, raising families, buying homes, financing education, caring for older parents — that could benefit from careful planning,” said McMillion. “The retirement news is encouraging, and there’s a lot of opportunity to plan more for the shorter term too.”


Risks

All investing involves risks including the possible loss of principal. There is no assurance any investment strategy will be successful or will meet its investment objectives.

General Disclosures

Wells Fargo Investment Institute, Inc. (WFII) is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

Opinions represent WFII’s opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. WFII does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. Wells Fargo Advisors associates referenced are registered with Wells Fargo Clearing Services, LLC.

About the Wells Fargo/Gallup Investor and Retirement Optimism Index

The results of this Wells Fargo/Gallup Investor and Retirement Optimism Index are based on a Gallup Panel web study completed by 1,240 U.S. investors, aged 18 and older, from May 6-12, 2019. The Gallup Panel is a probability-based longitudinal panel of U.S. adults who Gallup selects using random-digit-dial phone interviews that cover landline and cellphones. Gallup also uses address-based sampling methods to recruit Panel members. The Gallup Panel is not an opt-in panel. The sample for this study was weighted to be demographically representative of the U.S. adult population, using the most recent Current Population Survey figures. For results based on this sample, one can say that the maximum margin of sampling error is ±5 percentage points at the 95% confidence level. Margins of error are higher for subsamples. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error and bias into the findings of public opinion polls. For this study, the American investor is defined as an adult in a household with stocks, bonds or mutual funds of $10,000 or more, either in an investment account or in a self-directed IRA or 401(k) retirement account. About two in five U.S. households have at least $10,000 in such investments. The sample consists of 71% nonretirees and 29% retirees. Of total respondents, 42% reported annual incomes of less than $90,000; 58% reported $90,000 or more. The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup’s Index of Investor Optimism, which provides the historical trend data. The median age of the non-retired investor is 46 and the retiree is 68. The Index of Investor Optimism has an adjusted baseline score of 100 from when it was established in October 1996. It peaked at +152 in January 2000, at the height of the dot-com boom, and hit a low of -81 in February 2009.

Contributors: Kelly Reilly and Allison Chin-Leong
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