Stock market a good place to invest retirement savings

Oct. 20--More than two-thirds of working Americans see the U.S. stock market as a good place to invest their retirement savings.

That is up from 45 percent a year ago, according to the findings of the 2017 Wells Fargo Retirement Study. Analysts believe those numbers reflect growing confidence in a financial market that is eight years into a bull market -- one of the longest periods recorded.

Despite that confidence, the Wells Fargo study and a survey commissioned earlier this year by the American Institute of CPAs show less than half of American workers believe they will realize their financial goals by the time retirement rolls around.

The Wells Fargo survey, conducted by Harris Poll between July 6 and Aug. 8, found the percentage of workers who believed they would have enough savings to live comfortably throughout retirement increased from 52 percent in 2016 to 62 percent. But 48 percent of the respondents in the Wells Fargo survey believed their "standard of living will fall" after they retire -- the cost of health care proved problematic for those saving for retirement.

The AICPA survey, which Harris Poll conducted March 24-27, found 46 percent of the non-retired respondents expressed confidence about the prospects of attaining their retirement goals. The lack of overall confidence seemed to track anxieties related to the financial facets of retirement.

When asked about the source of those anxieties, 71 percent cited the cost of health care as a primary concern, and uncertainties of health care was a concern for 68 percent of the respondents.

The cost of living was a concern for 67 percent while 62 percent expressed concerns about the uncertainties of Social Security, and 52 percent cited concerns about tax rates.

"Saving for retirement is a marathon, not a sprint," said Greg Anton, a certified public accountant who serves as chairman of the AICPA's national financial literacy initiatives. "The most important thing people can do in any financial environment is focus on what they can control and understand the role that their actions play in their retirement plan."

Financial advisers with the AICPA say the traditional "three-legged stool" model of retirement planning -- Social Security, a pension plan and personal savings, which includes 401(k) and IRAs -- seems to have held up well for those who have retired already. Changes to Social Security, a sharp reduction in company pensions, and a greater emphasis on personal savings has left that "three-legged stool a bit unstable" for those whose retirement years lie ahead.

"Working throughout your life was once a reliable route to a comfortable, financially secure retirement," Anton said. "Americans have been asked to take on more responsibility and become more self-sufficient when it comes to their retirement planning."

American workers appear to be paying for those changes, according to the AICPA survey, which found non-retired Americans are more likely than their retired counterparts to make at least one financial sacrifice during retirement. Anton said even those "Americans who say they'll reach their financial goals are anticipating a more active 'retirement-lite' that involves working and making financial sacrifices."

Joe Ready, head of Wells Fargo Institutional Retirement and Trust, said workers who look to the stock market as a vehicle toward retirement must understand the risks related to such investments. While stocks historically have offered long-term growth potential, market fluctuations can impact retirement plans in significant ways.

Ready pointed to the collapse of global financial markets in 2008 as an example of how retirement planning can be affected: A 401(k) account worth $50,000 in January 2009 would be worth about $180,000 today. A worker scared out of the market by the calamity, Ready said, would have missed out on that growth opportunity.

"That said, it's also a good reminder to check up on your portfolio and rebalance it to align with your risk appetite," Ready said. "Asset allocation is one of the keys to retirement outcomes, so make sure allocation isn't overly aggressive because of rising equity markets."

The U.S. Securities and Exchange Commission offers the following list of factors that should be considered by those who are investing for retirement:

--Investors should consider the amount of time that will pass before financial goals are achieved. Those who have more time may want to consider riskier investments, while those with a shorter time horizon may prefer safer investments.

--Investors should diversify investments, allocating funds among stocks, bonds and cash, and invest in a variety of business sectors. This spreads the risk, so losses incurred when one investment performs poorly are offset by those that are performing better.

--Investors should rebalance their portfolios periodically to maintain the allocation mix established to meet financial goals. Rebalancing is necessary because some assets grow faster than others over time.

Reach D.E. Smoot at (918) 684-2901, @dsmootMPhx or dsmoot@muskogeephoenix.com.

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