Low interest rates and high health care costs may cause some
investors to delay retirement, according to the latest
Wells Fargo/Gallup Investment and Retirement
Optimism Index
. The survey finds many are not feeling confident in their ability
to retire on time.
Instead, many are reporting they expect to delay retirement as
they consider how best to grapple with poor
savings rates
and a challenging investment environment. Less than half of those
surveyed feel now is a good time to invest in the markets, and 57
percent feel they have little or no control when it comes to
maintaining or building their retirement funds.
Investor optimism drops 16 points
Overall, Wells Fargo and Gallup found investor optimism dropped
from 40 points in February to 24 points in May. For retired
respondents, optimism levels went from 38 points in February to
only 17 in May. That number is down from 61 points a year ago.
Investor pessimism seems to be fueled in large part by the
dismal interest rates being offered on many financial products.
Wells Fargo notes the core inflation growth rate is approximately 3
percent a year while CD rates are hovering below 1 percent.
"A year ago, retired investors were three times as optimistic as
working Americans and now retirees are less optimistic, which may
be attributed to how challenging it is to have any kind of growth
in savings," said Karen Wimbish, director of Retail Retirement at
Wells Fargo, in a statement.
One-third of investors surveyed said low interest rates would
cause them to delay retirement. In addition, 45 percent of
non-retirees and 34 percent of retirees are concerned current low
rates could cause them to outlive their retirement money.
Health care costs divert money from retirement
Rising health care costs pose an additional challenge for
investors. Two-thirds of investors report their health insurance
costs have increased a little or a lot in the previous year. For 29
percent of non-retirees, those increased insurance costs have meant
there is less money to set aside for retirement. Twelve percent of
those surveyed cite rising health care costs as a reason they
expect to delay retirement.
With questions lingering about Social Security's long-term
solvency, it is not surprising non-retirees are concerned about
health care costs and other expenses that may pull funding from
private retirement funds.
Two-thirds says their 401(k) accounts will be their main source
of money in retirement. At the same time, 36 percent are planning
to rely heavily on pensions and 31 percent say their stock
investments will be a major source of retirement funding. Only 20
percent of non-retirees believe
Social Security
will be a major funding source for them in retirement.