Investor Caution Threatens Retirement Savings

November 13, 2012 ( Four years after the 2008 global financial crisis, a lack of faith in equity investing appears to be lingering.

A T. Rowe Price survey of 850 adults in the United States ages 21 to 50 with at least one investment account found 61% believe investing in stocks is very important or important to helping them achieve their retirement savings goals.However, although half of investors (51%) surveyed say they have roughly the same tolerance for risk they had before the financial crisis, 37% indicate they are now refraining from investing in stocks because of current economic or market conditions.    

Risk aversion is also prevalent in investors’ attitudes toward fixed-income investing, with 76% of investors saying they are only somewhat or not at all willing to take on more risk to obtain a potentially higher yield.   

The good news is that with respect to their personal savings, 81% of investors say they are saving about the same or more than they were before 2008. 

“Investors have experienced a lot of market turbulence and tough economic times over the last several years, so it’s understandable from an emotional perspective that many of themincluding younger investorsmight be reluctant to invest in stocks,” said Stuart Ritter, CFP, senior financial planner with T. Rowe Price. “But people with decades to go before retirement need to do their best to block out the noise of the day and focus on the long term.For investors with a long time horizon and enough tolerance for volatility, stocks have always been the best asset class for growth potential and for staying ahead of inflation.”