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 Apparently not everybody. New data from Wells Fargo indicates that
something is spooking a sector of the U.S. population - the nation's
seniors - in a serious way.
On its Investor and Retirement Optimism Index, which tracks investor
sentiment, retiree optimism dropped 23 points in a single quarter.
"It was a very big drop, and the first time in over a year that
retirees were less optimistic than non-retirees," says Zar Toolan,
director of advice quality for Wells Fargo Advisors.
Over the same three months, non-retiree investor confidence actually
went up by 10 points.
Michael Sokal, a 70-year-old retired teacher in Worcester,
Massachusetts, is among the worriers.
"Our portfolio isn't what it was when we first retired," Sokal says.
"We have been drawing it down, and the performance isn't what we
hoped for. It's a big concern."
When Wells Fargo analysts started digging a little deeper, they
discovered a few different factors at work.
COSTS RISE, INVESTMENTS FLAT
With the cash in their bank accounts earning virtually nothing, and
the stock market essentially flat for the year, retirees have not
been seeing any portfolio improvements. Inflation, a notorious
portfolio-killer, looms whenever an economy is heating up.
Meanwhile, living expenses are lofty. Healthcare costs in retirement
for a 65-year-old couple now stands at an estimated $245,000,
according to Fidelity Benefits Consulting.
What really drives the point home for retirees is that they have a
shorter investment horizon than those still in the prime of their
careers. An investor at age 70 or 75 cares very much about
shorter-term portfolio gains.
As a result, financial planners report having do an increasing
amount of hand-holding with their senior clients.
"They worry about ISIS, rising interest rates, income disparity,
European recession, dysfunctional Congress, slowdown in China, and
falling commodity prices," says Austin Frye, a financial planner in
Aventura, Florida. "There is, in fact, a lot for them to worry
about."
STEPS TO TAKE
Financial advisers says seniors need take a deep breath, reassess
where they are at, and not make any rash portfolio decisions.
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Most of all, excessive worry indicates that you may not be as
risk-tolerant as you thought, suggests Wells Fargo's Toolan.
If you come to that conclusion, it is perfectly reasonable to
revisit your asset allocation, particularly if you have not done so
in a few years.
Wells Fargo has a quiz to that effect (http://bit.ly/1rmlGWT), which
can design a portfolio that will help turn down that worry dial.
Even if you are not fretting excessively, it is possible your
allocation has become out-of-whack in favor of higher-risk equities
after such a lengthy bull market. Shifting a percentage into fixed
income will not only steady your portfolio's volatility, but will
help you sleep better at night.
After all, the 2015 stock market was not that bad, says Frye, the
financial planner.
As for Michael Sokal, he has been slowly shifting his portfolio
towards a more moderate risk profile, and has eased back on things
like travel expenses.
Still, that hasn't taken the edge off the dread he feels about the
economic challenges on the horizon.
"One retiree friend of mine canceled a trip he had been looking
forward to for a long time, and another decided to just keep working
for years to come," says Sokal.
"Our financial adviser once told my wife and I that at least one of
us should plan on living to 100 - and that really struck home."
(The writer is a Reuters contributor. The opinions expressed are his
own.)
(Editing by Beth Pinsker and Bernadette Baum)
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