Despite the market volatility seen in 2019, the year ended with U.S. investors feeling more confident about their finances than they had in a while and them worrying less about an impending market crash or recession than any time since 2018, according to the latest Allianz Quarterly Market Perceptions Study from Allianz Life Insurance Company of North America.
During the fourth quarter of 2019, only 43% of respondents to a recent online survey by the firm said they were worried about a coming major recession right around the corner. That was down from 50% in Q3, 48% in Q2, 46% in Q1 and 44% in all of 2018, Allianz said.
Meanwhile, only 39% of respondents said they were worried about a big market crash on the horizon, down from 48% in Q3, 47% in Q2, 46% in Q1 and 42% in 2018, the firm said.
Those numbers had been steadily rising since 2018, before they fell after a relatively calm period in the markets in mid-November 2019, Allianz noted.
However, the latest survey’s findings weren’t all positive as there continued to be lingering concerns among American investors about issues including the rising cost of living and inflation, Allianz pointed out.
While investors may be feeling better about reduced market risks to their retirements, risks from inflation are “top of mind,” Allianz said. Forty-nine percent of respondents said the rising cost of living represented a big risk to their security in retirement, while 34% predicted inflation could prevent them from ever being able to retire, according to Allianz.
Investors with the longest runway toward retirement – millennials — were the most worried about the impact of rising costs, both now and in their future, the firm said. They were more likely to say the rising cost of living was preventing them from saving money for retirement as much as they should (62%, compared with 56% of Gen Xers and 42% of baby boomers). Overall, 51% of respondents said the rising cost of living was stopping them from saving as much for retirement as they should, according to Allianz.
Millennials were also the ones most worried about being able to pay for necessities including housing or medical care in retirement due to the rising cost of living (50%, compared with 46% of Gen Xers and 35% of boomers), Allianz said. Overall, 42% of respondents said they were worried they would not be able to pay for necessities because of the rising cost of living.
“The rising cost of living is a real threat to hard-earned retirement savings, particularly as people are spending more time in retirement,” according to Kelly LaVigne, vice president of consumer insights at Allianz Life. However, 38% of respondents said they were confident that their financial plan could deal with the rising cost of living, he said.
Also, despite the “current sense of calm, the number of people who say now is a good time to invest in the market continues to decrease,” he said in a statement. “This may be because people are anticipating more volatility in 2020, and don’t want to take the risks that those major swings can have on their savings and retirement,” he noted.
Those underlying worries could be what is driving a renewed interest in a product with guaranteed retirement income as a way to “help mitigate the risks that market volatility can have on retirement,” according to Allianz.
Thirty-one percent of respondents (31%) said putting some money into a financial product that provided a guaranteed stream of income in retirement was the most important step to take to help make sure they have a secure retirement, up from 26% in the prior quarter, but down from 33% in Q1, Allianz said.
One additional positive of the latest findings: 60% of respondents said having a financial product that offered the opportunity for increasing income could help reduce that risk, Allianz said. Boomers were even more likely to agree, at 63%, it noted.
LaVigne recommended that consumers worried about continued market volatility risks and the rising cost of living well beyond next year work with a financial professional to help mitigate some of those risks.
For the latest study, Allianz Life conducted a 10-minute online survey in November with a nationally representative sample of 1,005 respondents 18 and older, it said, adding there was a margin of error of plus or minus 3%. Fifty-two percent of respondents were females and 48% were males, it said.