Retired investors’ optimism plummeted in the second quarter on concerns about the economy, and most Americans say the financial market is not a good place for ordinary investors to grow wealth, Wells Fargo reported Wednesday.
The Wells Fargo/Gallup Investor and Retirement Optimism Index fell by eight points to +29 in June from +37 in February, largely because of a 17-point drop in optimism among retired investors.
Non-retirees’ optimism fell only four points — +31 versus +35 in February — the quarterly poll of 1,036 American investors 18 and older found. The survey was conducted between June 27 and July 9.
Notwithstanding their ambivalence about the economy and investing, 84% of the investors surveyed said the American Dream was achievable.
For 93%, the dream included the ability to afford a home. Ninety-two percent cited living comfortably in retirement, and another 92% said it included having meaningful employment.
The least cited version of the dream, mentioned by 76% of respondents, was having a standard of living surpassing that of their parents.
Nearly nine out of 10 non-retired investors said they were optimistic they would achieve the American Dream versus 77% of retired investors.
“The American Dream remains a pretty simple concept among investors: a home, a good job and money to live on later in life,” Joe Nadreau, head of innovation and strategy at Wells Fargo Advisors, said in a statement.
“While retirement gives some investors pause, most still view the American Dream optimistically and are taking steps to realize it.”
Although most respondents saw a secure retirement as fundamental to realizing the American Dream, 47% of the non-retired investors were either “extremely” or “somewhat” worried that they had not saved enough to retire.
Twenty-nine percent were a “little worried,” while 24% were “not worried at all.”
Similarly, 46% of both retired and non-retired investors were worried that they would not have enough money to last throughout their retirement. This included 19% who were “extremely worried.”
By contrast, 20% were “a little worried,” and 29% were “not worried.”
What Would You Do with $10,000?
Asked what they would do with an extra $10,000, 41% of investors said they would invest money in the markets, while 56% said they would keep it as cash or saved in a CD.
Researchers found that the conservative response tracked with 59% of all investors who said the financial market was a “fair” to “poor” place for average Americans to grow wealth, despite 2013’s historic stock market gains.
This view was held by 69% of investors with less than $100,000 in investable assets. Two-thirds of respondents said they were “highly knowledgeable” or “somewhat knowledgeable” about investing, about the same percentage that correctly answered that the stock market had risen in 2013, when asked about the market’s activity last year.
However, just 7% of investors said they knew the markets had an average return of 30% in 2013, based on S&P 500 returns.
Of the 37% who knew the market had risen in 2013, the majority thought it had increased only 10%, while another 17% thought it had risen 20%.
“There’s a perception gap with investors,” Nadreau said. “They said they’re pretty knowledgeable about investing, but they don’t seem to be aware of the market’s record growth over the last year and a half.”