What's holding Americans back from saving?

Many Americans are confident about their financial future, but are potentially jeopardizing their hopes for a secure retirement by holding back as investors, according to a new BlackRock Global Investor Pulse Survey.

Fifty-two percent of Americans in the poll had a positive view of their financial future, compared with 56% of respondents globally.

At the same time, 61% of American respondents cited high cost of living as the top threat to their financial future, while 55% pointed to the state of the U.S. economy and 50% to health care costs.

Only about 25% said the U.S. economy and job market were improving, despite recent employment and equity gains.

BlackRock polled 27,500 individuals in 20 countries, including 4,000 Americans, on a wide array of financial and investment management questions. The research, conducted in July and August, did not use income or asset qualifications in selecting survey participants.

Americans Feel Squeezed

BlackRock said the high cost of living was a particularly pernicious influence on investors’ psyche. Americans reported allocating 42% of household income to expenses, compared with only 32% worldwide.

As a result, less income was left over for spending, savings and investing, including retirement.

Three-quarters of American respondents said it was hard or very hard to both regularly pay bills and save for retirement.

Perhaps as a result, BlackRock said in a statement, a big majority of Americans considered Social Security a main source of retirement income. Sixty-four percent said the benefits would be “critical” to supporting themselves in retirement.

“It’s clear that immediate financial needs are hindering people’s ability to focus on longer-term investment decisions and retirement planning,” BlackRock president Rob Kapito said in the statement.

“Focusing primarily on the short term is concerning for investors of all ages, and can eventually create special risks for those closest to or newly in retirement, who need to be well prepared to spend as much as two or three decades in retirement.”

This “short-termism” was evident in survey results. Just 27% respondents said they were more interested in investing in stocks today than five years ago, and 18% said they were not interested in stocks at all.

Thirty-five percent said they did not hold and would not consider investments outside the U.S.

On average, the survey found, 63% of Americans’ total household savings and investments comprised cash and cash-related products, compared with the 59% global average. Most respondents intended to increase their commitment to cash over the next 12 months.

American respondents, acknowledging that their cash holdings were too high, said their ideal level of cash would be 29% of savings and investments.

“In a low-return environment, such as now, cash simply does not deliver the kind of investment performance that most investors need to reach their most critical objectives,” like retirement, Kapito said.

For the remainder of their savings and investments, respondents reported holding 18% in equities, compared with the global average of 15%; 6% in bonds; 5% in property; 2% in alternatives; and 7% in “other.” Retirement Hopes Robust

Notwithstanding the obstacles they saw, many American respondents were strongly optimistic about achieving the financial goals most important to them.

Seventy-one percent of those who placed a high priority on saving money were confident about achieving this goal, and 68% of these believed they would get there.

“To achieve their strong retirement hopes, Americans need to plan, save and invest with the realities of increasing retirement longevity firmly in mind — which means considering investments with good prospects for long-term return,” Kapito said.

“Longevity is an urgent challenge impacting every one of us — regardless of age, gender, geography, financial position and outlook — but we feel strongly that the challenge can be met.”  

Overall, millennials were the most confident age group in the U.S. Thirty-two percent of millennials thought the economy was improving, compared with 24% of Americans overall.

More than a third, 34%, thought the job market was improving, compared with 27% of Americans overall.

And millennials said they felt less pressure to make room for retirement savings, with 37% considering it “very hard” to pay bills and save for retirement at the same time, compared with a U.S. average of 43%.

BlackRock’s survey also found that millennials exhibited different attitudes about investing, especially when compared with baby boomers. Forty-five percent of millennials said they are more interested in stocks than they were five years ago; only 16% of boomers said this.

Millennials also reported spending the most time reviewing or adjusting their investments — some seven hours per month, compared with the U.S. average of around four hours per month and the boomer average of about two hours per month.

And despite their younger age, 60% of millennials reported having begun saving for retirement, compared with the U.S. average of 59%.

— Check out How Behavioral Finance Can Boost Goals-Based Investing on ThinkAdvisor.