Earlier today, BlackRock released results from our second annual Global Investor Pulse survey. We asked more than 27,000 investors across 20 countries to see how they were feeling on a range of financial questions, from retirement to savings to asset allocation.
You might describe the mood as “partly cloudy”— people are beginning to feel better about the economy and their own long-term financial prospects, but the financial crisis still casts a shadow.
Over half of global respondents (56 percent) feel positive about their financial future. On the other hand, nearly twice as many people think their country’s economy is getting worse as those who think it’s getting better. Millennials were a bright spot, with a more positive economic outlook and frequently better investing behaviors, a topic that BlackRock’s Heather Pelant will explore in a post tomorrow.
Retirement worries were prominent around the world. Over two-thirds of all respondents—and 73% of U.S. investors—are concerned about not being able to live comfortably in retirement.
Why? Lives are getting longer, the burden for retirement is increasingly being shifted from governments and employers onto individuals, wages (at least in richer nations) are stagnating, and—perhaps most importantly—high living costs are making it hard to save.
So in the face of these challenges, what should investors consider?
1. Move out of cash—and into the markets
Globally, investors are holding too much cash, and they know it. Investors report that cash makes up about three-fifths of their holdings (compared to only 15% in stocks)—but they also say that their “ideal” level of cash holding would be about half their current amount.
Cash holdings might feel safe, but they’re not—by staying on the sidelines, investors are losing value to inflation and missing out on growth opportunities. There are plenty of investment options to help get your money working for you.
2. Remember: Social Security Is a “Safety Net”, Not a Retirement Account
One of the most concerning statistics we got from the survey was that 64% of Americans say that Social Security will be “critical” to their ability to support themselves in retirement. The fact is—even with this week’s increase in Social Security payments—the program is not generous enough to support Americans in the kind of retirement they want, nor was it designed to be.
That means you have to start saving early, saving more, and maximizing your use of tax-deferred vehicles. Do everything you can to max out your 401(k) and your IRA, and remember that Social Security isn’t your nest egg.
3. Make a Plan.
Investors who spend time focused on their finances—as well as working with a financial advisor—report feeling more confident and more in control of their finances across all income levels.
As we’ve seen from the survey, bills and debt present a huge obstacle to retirement savings. But by developing a plan, getting a sense of how much you need to save—and by getting off the sidelines—you can begin to take control and find a way to cover your costs and still save for retirement.
Rob Kapito is President and a Director of BlackRock. A founder of the firm, he is responsible for day-to-day oversight of all BlackRock’s key operating units including Investment Strategies, Client Businesses, Strategic Product Management, Technology & Operations, and Risk & Quantitative Analysis.