The past may not be prologue, but it appears to be underpinning investor sentiment, which surged to a 16-year high in the latest Wells Fargo/Gallup Investor and Retirement Optimism Index.

The index, for the first quarter, rose 30 points from the previous quarter to +126. Its economic dimension, which measures optimism about economic growth, employment, the stock market and inflation, rose 20 points to +46 while its personal dimension, which measures investors’ outlook for income and investments rose 12 points to +80.

The results are based on a phone survey of 1,007 randomly chosen investors conducted just days after the Dow Jones industrial average topped 20,000 for the first time. The Dow remains above 20,000, but it’s trading below the 21,116 high reached earlier this month and has fallen in five of the last six trading sessions through Wednesday.

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It’s not exactly clear what is underlying investors’ optimism other than the markets themselves – 60% say now is a good time to invest in financial markets – especially since just 29% of respondents expect their taxes will decline, and tax cuts are often mentioned as a key reason for this year’s stock market rally. 

Close to 40% of investors expect their income tax rate will rise in the next few years, and 31% expect it won’t change. More surprisingly, more than 70% said that if their taxes were cut by a few thousand dollars they would use the money to increase savings or investments (47%) or pay down debt (24%).

“It’s especially noteworthy that seven out of 10 would improve their financial health through either saving and investing or paying down debt as a result of a potential tax cut,” said Joe Ready, head of Wells Fargo Institutional Retirement and Trust, in a statement. “Saving and investing enough is the number one factor that will drive retirement outcomes.”

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A growing percentage of investors are confident they will have enough money in retirement to maintain the lifestyle they want – 78% compared to 69% in 2014, when the question was last asked – and just 36% are worried they will outlast their savings in retirement, compared with 46% in 2014.

Among those most confident about their future retirement are investors with written retirement plans. Forty-three percent of those investors are “highly confident” of maintaining their lifestyle in retirement compared with 23% who have no such plan.

Having a specific retirement age in mind in key to any retirement plan, according to Wells Fargo and Gallup, but only 28% of nonretired investors say they have given much thought to the issue, including only four in 10 nonretired investors who are 50 or older.

Those omissions are serious, according to Ready. “The actual age you retire is a really important factor in determining your monthly income and how long it will last.” He suggests that investors start as soon as possible to plan their retirement age because then they will “have a long runway ahead” to make adjustments to their strategy.

The survey notes that more than half of retired investors say they wish they had started thinking about their retirement age sooner than they did.

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One surprising finding of the survey was investors’ views of rising interest rates. They were not very concerned about rising rates, although it should be said that the survey took place about a month before the last Federal Reserve meeting, where policymakers hiked interest rates 25 basis points and indicated further rate increases. Almost two-thirds of investors said higher rates would be a good thing or not make much difference; only one-third saw rate hikes as negative.

More retired investors were positive about the economic impact of higher rates (37%) than nonretired investors (31%), and more nonretired investors (37%) were negative about higher rates than retirees (26%).

“These differences are consistent with retired investors’ greater reliance on interest income, compared with nonretired investors’ greater dependence on mortgages and other loans for which lower rates are preferable,” according to the survey.

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