We spoke with 4,000 U.S. investors

Jun 26, 2017
By BlackRock

Often times, investing has as much to do with the mind as it does the means. That’s why BlackRock continues to reach out to investors to understand what’s on their minds and how it’s affecting their investment decision-making.

In the fifth edition of our BlackRock Global Investor Pulse Survey, we heard from 28,000 individuals across 18 countries, including 4,000 respondents from the U.S. Among other things, we learned American investors are feeling slightly less confident, but still focused on (if underprepared for) retirement.

Confidence has declined

Since August 2016, Americans’ confidence in their saving and investing decisions has dropped more than 7%. Respondents’ positivity around their financial future declined slightly as well, though half of Americans still have a positive outlook for their financial future.

The general cost of living and cost of health care were key sources of angst, cited by 57% and 54% of respondents, respectively. Paying for health care showed a significant jump as a financial priority.

Overall, however, retirement remained the most important financial issue for Americans. It was identified as the most relevant topic highlighted in the media and the topic most frequently discussed with financial advisors.

Retirement weighs heavy

As important as it is, our study revealed that 4 in 10 Americans have yet to start saving for retirement. Equally worrisome: More than half think they either aren’t on track to reach their retirement income goals or don’t know where they stand.

Only 36% of Americans feel confident they will have the income they hope for in retirement. In fact, retirement savers said they expect to need $437,000 to meet their retirement income goals, but those in the 55-64 age bracket have an average of only $127,000 set aside. The most commonly stated barrier to saving? Not earning enough.

Unsurprisingly then, the top factors that would prompt people to invest more for the long-term are pay raises and employer-matched contributions to retirement plans. Of course, these are not easily controlled factors. More realistic in terms of helping Americans to reach their retirement goals is seeking to maximize their investing outcomes by putting their cash to work.

The state of cash

On average, Americans hold 58% of their liquid investible assets in cash. The bad news: It’s earning little to no interest. The good news, as illustrated below, is that roughly 20% of this pile could potentially be more productively invested.

Nearly half (45%) of Americans have considered investing some of their cash during the last year. The results suggest that greater acceptance and understanding of risk would help them take that step. For example, reassurance that capital is safeguarded and a clear understanding of risk were bigger motivators than the past performance of an investment.

Of the 55% who are not considering investing more, the top reasons are: having too little cash to make it worthwhile, risk aversion, and a desire for speedy access to cash. If you find yourself among this group, it’s important to understand the adverse effects of holding cash long term: inflation steadily erodes purchasing power and retirement savings gaps are unlikely to be closed in returnless assets.

Reasons for holding cash

Reasons for holding cash

Source: BlackRock Global Investor Pulse Survey, June 2017.

The value of advice

The data seem to suggest great value in working with a financial professional. Advised Americans we surveyed seemed better prepared for retirement, with only one in five stating they are not on track. Advised investors also seem to be more fully invested. They hold just 37% of their assets in cash and reserve 26% of their cash for a long-term savings or investment opportunity.