Future Retirees Look to Investments

March 28, 2011

gallup-retirement-sources-mar-2011.jpgInvestors who have yet to retire look to retirement accounts, such as 401(k), IRA, and Keogh accounts (74%), and stocks or stock market mutual fund investments (40%) as major funding sources when they retire, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey. Social Security ranks sixth at 28%.

In sharp contrast, current retirees say they depend on pension plans (49%) and Social Security (48%) as their top sources of income; retirement accounts rank third at 38%. The Wells-Fargo/Gallup Investor and Retirement Optimism Index defines investors as those having $10,000 or more of investable assets.

Future, Current Retirees Rank Same 6 Funding Sources Differently

While the top six major retirement funding sources are the same for those yet to retire and retirees, future retirees expect to depend far more on their personal resources than do current retirees, as illustrated by the sharp difference in how these two groups rank Social Security. Gallup says these rankings also reflect the shift among employers away from pensions to tax-favored retirement accounts.

It seems somewhat surprising, given the continued depressed housing market and falling home prices, that 36% of those yet to retire look to the equity in their home as a major source of retirement funding, similar to the 32% of current retirees.

Investors Rank Investments, Health as Top Factors Affecting Retirement Timeline

gallup-retirement-factors-march-2011.jpgAbout three in four investors say the major factor that will determine when they are financially able to retire is the value of their investments, which Gallup says reflects non-retired investors’ reliance on their own resources to fund their retirement. Another two in three investors rank their personal health and the cost of healthcare as key determinants of their financial ability to retire.

The status of their pensions ranks fifth, at 53%, among the factors driving when investors will be financially able to retire. While fewer Americans have pensions, those who do have them seem to see their pension provisions as a key determinant.

Natl Issues Less Important to Retirement Decisions

National issues trail many personal concerns in investors’ reports of what factors will have a major impact on when they will be financially able to retire. Roughly half of investors say inflation (59%), the solvency of Social Security (50%), and energy prices (48%) will have a major impact on their ability to retire. Workplace and job conditions rank eighth, at 43%. Investors are least concerned about interest rates (37%) and the value of their businesses (37%) and homes (36%).

Investor Saving Habits Align With Retirement Expectations

Gallup/Wells Fargo data indicates that retired investors’ behaviors seem aligned with their retirement funding expectations:

  • 73% have a 401(k), and 63% have contributed to theirs in the past 12 months.
  • 62% have an IRA, and 37% have contributed to theirs in the past 12 months.
  • 45% have a pension.

Furthermore, 73% have put away more (31%) or the same amount (42%) of money for retirement over the past 12 months as they did the prior year.

About half of retirees (58%) and future retirees (48%) say they have a great deal or quite a lot of confidence that they will have the money they need to live comfortably throughout their retirement. And, while 62% of retirees are similarly confident they will be able to maintain their lifestyle in retirement without working, fewer future retirees feel this way (40%).

Many Americans Lack Savings

Twenty-seven percent of Americans have no personal savings and 34% have no retirement savings, according to results of a recent Harris Poll. Just 18 months ago those numbers were moderately lower, at 22% and 30%, respectively.

About the Data: Results for the Wells Fargo/Gallup Investor and Retirement Optimism Index survey are based on telephone interviews conducted as part of Gallup Daily tracking, with a random sample of 1,000 or more respondents, aged 18 and older, living in all U.S. states and the District of Columbia, selected using random-digit-dial sampling from Feb. 1-8, 2011.


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