About one-third of investors surveyed (35%) consider protecting retirement assets more important than increasing those assets, the survey found. Just 8% of respondents consider increasing assets more important.
“In a continued choppy market environment it’s not surprising that investors are concentrating on managing risk and protecting their nest egg. It’s also clear that the sharp downturn in 2008 remains fresh in their minds,” said Carrie Schwab-Pomerantz, senior vice president at Charles Schwab & Co. Inc.
The 2008 financial crisis may have had a particular impact on younger Americans who said they were most likely to sit on the sidelines in the next six months and move assets into more stable investments such as money markets and savings accounts. The survey found 29% of people age 18 to 34 plan to pull money out of the market, with only 11% of older Americans indicating they would take do so.
“Younger Americans have seen their parents’ retirement savings and their own retirement savings take some hits with the recent market volatility,” Schwab-Pomerantz said. “Younger Americans seem to be more risk averse than ever before. While their time horizon for retirement should be conducive to staying invested and maintaining a more moderate or even aggressive risk level, we are seeing the younger generation sway to be more conservative given what they have witnessed in the market in recent years.”
Other findings from the survey include:
• One in four Americans (26%) plans to seek professional advice on managing their retirement accounts in the next six months given the recent economic environment and uncertainty about the future;
• At least two in five Americans (42%) are concerned with uncertainty about future legislation that may have an impact on retirement accounts;
• Concerns include protecting retirement savings during market volatility (25%), generating enough income to live on if interest rates remain low (23%), striking the right balance between portfolio growth and asset protection (20%), and growing retirement savings to outpace inflation (18%); and
• Just 6% of respondents plan to take additional risk in their retirement investment accounts in the next six months.
The survey found a disconnect between what Americans say and what they do when investing for retirement. More than a third of respondents said they feel protecting assets is always most important, but 37% are not investing in products traditionally designed to manage risk, such as fixed-income instruments and annuities. Just 17% of respondents report using bonds and other fixed-income products, followed by annuities and other insurance products (13%). Among the 49% of respondents who say they are managing their risk with investments, about half are using cash instruments, making it the most popular investment category to manage risk.
“Lately, we are spending a significant amount of time talking with clients about risk management, but it’s important for people to realize that asset protection is often times just one part of the equation. In many cases, people also need to find ways to balance risk management with portfolio growth in order to build their assets and, at the least, outpace inflation,” said Bill Allen, vice president of Schwab Private Client Investment Advisory Inc.
In addition, Allen noted that the survey found that only 11% of Americans plan to rebalance their retirement portfolio in the next six months.
The Charles Schwab Retirement Survey was conducted by Koski Research between May 3 and 7, using random digit dialing of listed and unlisted numbers, with 20% of the sample reached by cellular/mobile phones. Quotas are set to ensure representation of the U.S. population age 18 and over.
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