U.S. investor confidence is at a 17-year high, according to a new report from Wells Fargo and Gallup. Specifically, the duo’s Investor and Retirement Optimism Index rose in the fourth quarter of 2017 to 140, up from 138 in the Q3 and the highest reading since the dot-com bubble. Surveyed investors expressed broad optimism about economic growth, stock market performance, and employment, and nearly three-quarters of respondents said that they are “somewhat” or “very optimistic” that they will be able to achieve their investment goals over the next five years.
If those bright outlooks play out as expected, then that will go a long way towards helping investors achieve the $1 million nest egg that the median respondent believes is needed to provide their desired standard of living in retirement. However, nearly half (47 percent) of surveyed investors said that they do not currently have a savings “number” in mind for retirement, and only 41 percent of those that do have a specific savings target in mind can also estimate what kind of income that sum will be able to generate annually in retirement. Such uncertainty suggests that many Americans would likely benefit from consulting with a professional financial advisor.
Another thing that can assist workers in achieving a comfortable retirement is taking advantage of employer-provided 401(k) benefits, and encouragingly three-quarters of surveyed non-retired investors said that they have a 401(k). When asked about what they value the most about this retirement savings vehicle, more than half (57 percent) of surveyed non-retired investors cited the “match contribution from their employer,” and a third referenced the “tax deferral on the money they contribute.” For the latter, 46 percent of respondents said that they would probably “save less” or “stop saving” in their 401(k) if the tax-deferred status of their plan was taken away.
That suggests lawmakers made the right decision not to remove such a popular feature from 401(k) plans in the tax package that recently made its way through Congress. Fredrik Axsater, an executive vice president at Wells Fargo, added that “The 401(k) plan has evolved into the greatest savings and investment vehicle that Americans have today to steadily build a retirement nest egg. Pre-tax savings has a direct impact on the level of savings that people achieve, and we have to recognize this as the country contemplates changes in tax policy. The employer-sponsored 401(k) is critical to allowing working people to save and invest over time.”
Sources: Gallup, Wells FargoPost author: Charles Couch