Some Boomers and Retirees Are Optimistic on Finances

A new survey from American Funds finds a broadly optimistic outlook among more affluent Baby Boomers and retired investors—despite widespread reporting about Americans’ lack of retirement savings.

These groups plan to remain invested in equities to generate adequate income to live on, American Funds says in a report exploring the survey, “The Wisdom of Experience: Lessons from Boomers and Retied Investors.” The purpose of the study was “to probe investment objectives, as well as awareness and attitudes toward specific topics such as volatility, downside protection and fund selection criteria.” It was also designed to elicit investor attitudes around the emotional and lifestyle impacts of retirement.

A majority, 86%, expect their savings to generate income and even grow in retirement, according to the survey of 1,035 Americans adults age 50 and older with at least $100,000 in investable assets. More than two-thirds, 69%, say they do not alter their portfolios when the market fluctuates, and 64% say sticking with their investment strategy makes them feel smarter as an investor. A full three quarters, 75%, plan to stay invested in equities, and 74% believe the right mutual funds can outpace the market and do better than average. Seventy-two percent say mutual funds with objectives such as growth and income, lower volatility and low fees can help people live better in their retirement years.

NEXT: Advice to younger generations

While 31% of surveyed investors began saving for retirement before the age of 25, and 42% started after the age of 30, higher percentages would advise the next generation to start at an early age, with 64% suggesting that their children and grandchildren start before the age of 25. Only 10% say they should start after the age of 30.

The surveyed investors are also cognizant of the importance of downside protection, with 80% citing that as a key priority. However, only 53% are aware that index funds expose investors to the full ups and downs of the market, and only 36% understand that index funds, with full market exposure, may actually be riskier for those with a shorter investment horizon.

“We wanted to understand what makes investors who are closer to or in retirement feel smarter about investing and how they define a purposeful next chapter,” says Pete Thatch, senior vice president and director of wealth management at American Funds. “While everyone has a different aspiration for retirement, the survey uncovered a certain wisdom of experience in Boomers and retired investors’ investment approaches—and key lessons and insights for younger generations.” That said, the survey also revealed that advisers and sponsors need to educate investors more about “protecting against the downside,” Thatch adds.

NEXT: Working Boomers less confident

Bearing out the results of many other investor surveys, American Funds discovered that Boomers still in the workforce are not as confident as retirees. For example, only half of non-retirees (51%) expect to have more retirement income than their parents, compared to 70% of retirees, and 29% of working Boomers expect to continue to work part-time to fund a semi-retirement.

Furthermore, 49% of retired investors left the workforce earlier than their parents, but only 25% of working Boomers expect to do so.

Overall, however, American Funds says that the investors surveyed “are an optimistic bunch. A majority are or expect to feel satisfied or relaxed in retirement. Very few expressed negative feelings about their retirement, with no more than one in 20 expressing feelings of dissatisfaction, boredom or regret. Interestingly, the optimism felt by these respondents remained consistent across gender, age and asset level. Whether they have $100,000 or $5 million of investable assets, these investors expect to feel satisfied or relaxed in retirement.”

American Funds’ full “Wisdom of Experience” report can be downloaded here.