Workers Investment Expectations Off the Wall

The Merrill Lynch 2002 Retirement Survey found that while 36% of workers expect a return of 14% or less from their investments currently, 10% were looking for 15% to 49% – and 15% were expecting returns of 50% or more.  However, 39% said they didn’t know what to expect.  

Things were no better when it came to retirement-based expections, where 20% said they were expecting a 50% or better return in retirement, compared wtih 38% who didn’t know and 11% that were looking for a 15%-49% gain.  Less than a third were expecting 14% or less.

The survey found that many participants are also off the mark when it comes to protecting their 401(k) assets. Some 54% said inaccurately K plan accounts are guaranteed by law. Only a quarter of respondents said they were not protected.

Despite those findings nearly half (43%) said they understood “the basics” about investments, and a quarter said they were confident in their investment skill level.  Higher income workers were more confident than those at lower pay scales.  Just 14% of those making more than $65,000/year said they “know very little” about investments, compared to 31% overall, and over half (51%) of those making less than $35,000 per year. 

Interestingly enough, those who were managing their own money were more confident than other investors about their ability to do so, with 85% saying they were somewhat or very confident about their ability to manage their retirement savings.  Overall 73% had confidence in a financial advisor managing those savings – while just 30% felt that way about the government’s ability.

“This misperception exists across all income and education levels, among those with advisors and most alarmingly, among the very people with the greatest dependence on a 401(k) in the future,” Merrill Lynch researchers wrote. “What is clear is that today’s attitudes and behavior are based on profoundly inaccurate perceptions.”

They were more on target when it came to defined benefit pension plans. Some 53% of participants said pensions are guaranteed. That protection for private-sector pensions actually comes from the federal Pension Benefit Guaranty Corporation.

According to the survey:

• 39% felt IRAs were guaranteed
• 42% said their jobs were guaranteed
• 51% said that guarantee extended to Social Security.

All in all, nearly half (49%) said they planned to continue their current contribution levels in the year ahead – while 38% were looking to increase that savings level.  Roughly two-thirds (62%) rated their employer-provided retirement education as effective. 

The survey was taken by telephone from January 23 to January 29, 2002 and covered 1,000 respondents ages 30 to 65 years old.