The Wells Fargo/Gallup Investor and Retirement Optimism Index jumped to plus-46 in the third quarter, its highest level in seven years.  

The index is up 17 points from the second quarter’s plus-29, with most of the gains stemming from investors’ heightened optimism about economic growth and the labor market. While the optimism index is at its highest point since December 2007, it remains well below the pre-2008 recession, 12-year average of just under plus-100.

The Wells Fargo/Gallup quarterly survey measures the perceptions of U.S. investors with $10,000 or more in investable assets. Results are based on phone interviews with about 1,000 investors, aged 18 and older, from Aug. 15 to Aug. 24. 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. 

Optimism among nonretired investors jumped almost 20 points to plus-50, while the optimism of retired investors rose 11 points to plus-35.  

“Investors are saying they’re more optimistic about the economy and the job market. But nonretirees worry about their ability to earn more in their lifetime, and they are skeptical the stock market is the place for them to grow their savings,” says Karen Wimbish, director of retail retirement at Wells Fargo. “Clearly, average investors have not forgotten their recession experiences.”

Looking to the future, the majority of nonretired investors who were surveyed said they expect their income to be stagnant: 56 percent said they don’t foresee a time when their income will be significantly higher than it is today, as compared with 42 percent who foresee potential for income growth.

Nonretirees with $100,000 or more in assets are especially pessimistic about the prospect of earning more: 61 percent of those surveyed said they don’t foresee a time when their income will be significantly higher than it is today, compared with 51 percent of investors who have less than $100,000 in assets.

When asked how their finances today compare to five years ago, almost 60 percent said they are doing about the same or worse than five years ago. Similarly, just 37 percent said they are saving and investing more money in recent months than they did prior to the recession. These figures are essentially unchanged from two years ago, indicating that investors haven’t been able to make much financial headway in the economic recovery.

When asked directly about the impact the 2008 recession has had on their finances, nearly half said they are still feeling the effects of the recession. About 30 percent said they only feel its impact a little, while 22 percent said not at all.

In the midst of the national conversation about wage stagnation, half of surveyed investors said they think the pressure on American families’ ability to save today is due to rising prices caused by inflation, whereas about four in 10 said the pressure is caused by lack of wage growth or stagnation. Nine percent of investors said the pressure is caused by a combination of the two factors.

A new survey question this quarter asked investors whether they think caution toward investing in the stock market is “wise because it protects people from possible market losses,” or “unwise because it prevents people from realizing significant market gains.”  Sixty percent of all investors said such caution is “wise,” while 37 percent called it “unwise.”

In the poll, 68 percent of investors said they “actively choose stocks for their long-term investment accounts,” but almost a third said they “consciously avoid stocks in long-term investment accounts.”  When respondents are divided between those with $100,000 or more in assets and those with less, 42 percent of those with less than $100,000 in assets said they “consciously avoid stocks in long-term investment accounts,” versus 20 percent of those with more than $100,000 in assets.

Of the 29 percent of all investors who said they consciously avoid stocks, about 40 percent said they feel confident they can reach their financial goals without stock market exposure. About 55 percent said they aren’t confident they can reach their financial goals without taking on stock market risk, but they still think it’s better to avoid that risk.

“The fact that nearly seven out of 10 say they choose stocks for their long-term investing is a good strategy for growing assets over time, and yet it’s noteworthy that nearly a third actively choose to avoid stocks for long-term accounts. And, this active avoidance is even more pronounced for people with fewer assets, Wimbish says, adding, “These investors could stand to gain in the market through a long-term, gradual investing strategy, and they seem to know it but they think avoiding risk is more important.”

While most surveyed investors said they actively choose to include stocks in their long-term investment accounts, they might not be allocating enough to stocks. On average, investors said 38 percent of their retirement savings are invested in the stock market.  Naturally, this is lower among retirees, at 33 percent, but not much lower than among nonretirees, who said they have 40 percent invested in stocks. 

In sharp contrast to the common recommendation that investors’ scale their exposure to the stock market by age, the survey finds little difference in the average percentage of retirement savings that investors of various ages said they have invested in the stock market. This average is 33 percent among all retirees, 39 percent among nonretirees aged 18 to 49, and 41 percent among nonretirees aged 50 to 64.

Taking their savings and Social Security income into consideration, nearly 70 percent of investors said they are “highly” or “somewhat” confident they will have enough money to maintain their desired lifestyle throughout their retirement years.

However, nearly half said they are “very” or “somewhat” worried about outliving their savings, including 50 percent of nonretirees and 36 percent of retirees. Retirees who run out of money could become entirely dependent on their Social Security checks.

“Clearly Social Security plays a key role in thinking about retirement income, and concerns about the government’s ability to address the system’s financial problems exist for both retirees and nonretirees,” Wimbish says.

Six in 10 of those surveyed don’t think federal lawmakers will address the financial problems with Social Security in time to preserve the system for future retirees. Two-thirds of younger investors, those under age 50, were especially pessimistic, saying lawmakers won’t fix the system. These same investors also are much more doubtful than older ones that they will ultimately receive their full or even slightly reduced benefits in retirement. 

Almost 40 percent of surveyed investors between the ages 18 and 49 believe they will get most or all of the benefits due to them under the current system,  compared to  71 percent of those between the ages 50 and 64, and 73 percent among those 65 and older.

Despite these divergent perceptions about whether Social Security will be there for them in retirement, nonretirees on average expect Social Security to account for 26 percent of their annual retirement income, while retirees, on average, report that it currently accounts for 30 percent of their retirement funding.

The index includes just over 1,000 investors randomly selected from across the country with a margin of sampling error of plus-or-minus three percentage points. For this study, the American investor is defined as an adult in a household with total savings and investments of $10,000 or more. About two in five American households have at least $10,000 in savings and investments. 

Seventy-three percent of the sample is nonretirees. Of total respondents, almost 60 percent reported an annual income of less than $90,000.

The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup’s Index of Investor Optimism that provides its historical data. The median age of nonretired investors is 47, and the median age for retirees is 69.

Wells Fargo & Co. is a nationwide financial services company with $1.6 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 locations, 12,500 ATMs, and the Internet. It has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 employees, Wells Fargo claims to serve one in three households in the U.S. 

For more than 70 years, Gallup has been a recognized leader in the measurement and analysis of people’s attitudes, opinions, and behavior. While best known for the Gallup Poll, founded in 1935, Gallup’s current activities consist largely of providing marketing and management research, advisory services, and education to the world’s largest corporations and institutions.