Investor optimism jumped in the first quarter of 2014, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index. It rose to +37 in February from +25 in November 2013, fueled by a 35-point surge in optimism among retired investors.
Optimism among non-retired investors rose 3 points from November to February.
According to Wells Fargo, higher optimism among retirees stems from heightened confidence about matters affecting their personal finances. Retirees say they are more upbeat about their ability to maintain or increase their current income level over the next year, and they are also more optimistic about the stock market.
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"It is both interesting and encouraging to see that retirees are more optimistic," said Joe Ready, director of Wells Fargo Institutional Retirement and Trust. "Dating back to May of 2012, retirees have responded to this poll every quarter with much more pessimism about their situation than have the non-retired — this is a real shift, and most likely correlates to the combination of a stronger stock market and the prospect of higher interest rates in the future."
In his 2015 budget, President Obama proposed lowering limits on the tax deferred money that flows to retirement accounts, but 9 out of 10 investors surveyed said they would like to see an increase in the amount of money people can set aside in tax deferred accounts.
While investors seek the incentive to save more, they do not support the idea of increasing tax penalties on investors who withdraw money from their accounts before retirement age, with 78 percent saying they would oppose such a policy.
A majority of investors also believe the existing retirement vehicles, including the 401(k) and IRA, provide enough options to Americans versus 40 percent who think more choices are needed. However, this gap widens among those with access to a 401(k)-type plan: 62 percent say available retirement vehicle options are sufficient, while 37 percent say more types are needed. Among those without access to a 401(k)-type plan, 49 percent say available options are sufficient, and 46 percent say more types are needed.
The survey also asked investors if looking at their retirement balances gave them more confidence in their retirement future. Forty percent said their retirement outlook hasn't changed, while 36 percent said they are a lot more or a little more confident about the future.
The uneven distribution of wealth in the U.S. is also cause for concern. Among all investors, 55 percent said it is a problem, and among non-retired investors, one-third say income inequality will make it harder for them to retire.
More than 60 percent of investors are still afraid of a stock market downturn, like the one that hit in 2008/2009, despite a bull market in 2013.
"In the past five years of recovering from the depths of our recession, 2013 was a banner year for stocks, but it does not appear to have mitigated the strong skepticism that I think still exists among average investors; investors appear willing to trade off double-digit stock market growth to avoid the risk of bruising losses so many experienced in 2008 and 2009," said Ready.
A majority of investors — 64 percent — said that if they had the choice they would choose a secure retirement investment option over higher growth potential.
The survey was conducted over the telephone from Feb. 6-16, 2014.
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