Investors are hungry for control in these uncertain times, according to a poll by Wells Fargo, and the ability to save for retirement is a major factor in their financial security. The Wells Fargo/Gallup Investor and Retirement Optimism Index found that 82% of investors feel they have a moderate or high level of control over their ability to save enough for retirement, second only to reducing or staying out of debt (92% of investors agree this is largely in their own hands).
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Wealthy investors were more likely to feel that impact, with 54% saying they had a lot of control over their retirement savings, compared with 30% of all investors.
“Investors were absorbing a number of significant developments in the economy, politics, and the pandemic at the time of this survey,” according to Michael Liersch, head of Advice and Planning for Wells Fargo’s Wealth & Investment Management division. The survey was conducted Nov. 9-15, among 1,709 adults with at least $10,000 invested in stocks or bonds, including retirement investments.
Liersch said that although events like the election, an increase in COVID-19 infections, promising results of COVID-19 vaccines and the October jobs report all weighed on respondents, they ultimately had a positive effect.
“Human beings, in general, are ‘uncertainty reduction machines,’ so when uncertainty is reduced, people often feel better about, or more in control over, what’s to come,” he said.
The Wells Fargo/Gallup Investor and Retirement Optimism Index rose 24 points to 42 in the fourth quarter. Wells Fargo noted that the Q4 increase is “specifically because investors are feeling better about the future of the economy and jobs.” For example, 48% of respondents are feeling at least somewhat optimistic about the next 12 months in the economy, up from 40% last quarter. Optimism regarding unemployment showed similar gains, increasing seven points to 40%.
Optimism around the stock market and inflation was more tempered, with levels staying more or less the same at 47% and 19%, respectively.
Some things advisors should be aware of as they consult with their clients over the next few months:
- Investors are a little wary about the stock market, with 65% reporting at least some confidence in markets as a good way to build wealth for retirement. This is down from 69% in the second quarter.
- A quarter of investors are keeping more of their money in cash and have been since the start of the pandemic, while 32% say they still feel like they don’t have enough cash on hand.
“Liquidity affords people a sense of short-term control, while long-term they may recognize that they should either be investing or staying the course in the markets,” Liersch said. This dynamic can create a bit of inner-conflict when making financial decisions for one’s ‘present’ versus ‘future’ self. People wonder: Which one should I prioritize during times of uncertainty?”
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