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The Wells Fargo/Gallup Investor and Retirement Optimism Index jumped 12 points in the first quarter, rising to +37 in February from +25 in November 2013. The positive sentiment approaches the +43 of last May before the budget brinksmanship and partial government shutdown lowered investor optimism last fall. The survey of 1,011 investors was conducted February 6-16, 2014.
The first quarter rise in optimism is due almost solely to a 35-point surge in optimism among retired investors to +41, from +6 last November. By contrast, optimism among non-retired investors held steady at +35, similar to their +32 in November.
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.
“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.”
Majority of Investors Want Increased Tax Deferral Limits on Retirement Accounts
President Obama has indicated that in his 2015 budget, the Administration will propose to lower limits on the tax deferred money that flows to retirement accounts. However, nine out of 10 investors (91%) say they want to see an increase in the amount that people can save in a tax deferred retirement account. 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% saying they would oppose such a policy.