More than 40 percent of investors are worried that the United States will be hit by another recession just as they are planning to retire, and an astounding 73 percent believe the U.S. is headed for a major retirement crisis in the next 20 to 30 years.
Those are the big takeaways from the latest Wells Fargo/Gallup Investor and Retirement Optimism Index, which fell 10 points in the third quarter to 33, down from 43 recorded in May.
Retired investors, according to an accompanying survey by Wells Fargo and Gallup, were less optimistic about the economy than those who haven't retired yet, but investors who are still working said they are extremely or very worried about a repeat of the stock market crash in 2008. This concern took precedence over having a lower standard of living, running out of money or having to work into retirement.
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More than two-thirds of investors believe that a slow or no-growth economy will be the norm for their lifetime.
"Over the summer, investors watched rising mortgage rates, a volatile stock market and stubborn unemployment figures – all of which understandably impact optimism. What is so striking to me is the fact that five years after the market collapse, non-retired investors harbor significant concerns about a repeat financial crisis. The past continues to color their view of retirement, and whether the stock market is a place where they can invest and grow savings," said Joe Ready, director of Institutional Retirement and Trust at Wells Fargo.
Nearly 70 percent of investors are still wary of the stock market, even though the market has made steady gains since the downturn five years ago. Fifty-nine percent of retired and 51 percent of non-retired investors say they haven't seen a noticeable increase in their retirement account values as a result of stock market increases.
This lack of confidence in the market has translated into fewer assets being invested in stocks and bonds. According to Wells Fargo, retired investors only had an estimated 39 percent of their assets in stocks or bonds and for non-retirees that figure was 34 percent.
The survey asked investors what would make American investors return to the stock market. Sixty percent said that lower unemployment and a stronger economy would make the stock market more attractive, and 41 percent said they needed a greater personal understanding of the stock market before they would invest more.
Wells Fargo and Gallup interviewed more than 1,000 investors by telephone from Aug. 14-21, 2013. The index had a baseline score of 124 when it was established in October 1996. It peaked at 178 in January 2000, at the height of the dot-com boom, and hit a low of negative 64 in February 2009.
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