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New Survey: Though More Comfortable with Volatility, Americans Seek Wealth Protection Strategies

wealth protection strategies volatility article

In the last three years, Americans have reported they have become more accustomed to market volatility. But a lingering anxiety over this market uncertainty has led them to seek, in record numbers, strategies to protect a portion of their retirement savings.

This latest snapshot of Americans’ attitudes toward market volatility, and its effect on their retirement planning, comes from Allianz Life’s 2018 Market Perceptions Study.

Conducted this April, the online study surveyed a nationally representative sample of more than 1,000 respondents. Of this population, more than half had investable assets above $200,000.

Chief among the findings? A growing number of Americans said they are comfortable with market conditions and are ready to invest. That share of people was 35% in the 2018 study, compared to 26% in a similar Allianz study published in 2015.

Protecting Retirement Savings is an Even Greater Concern

Being comfortable with volatile market conditions doesn't mean investors are happy about them.

The Allianz study found that 37% of respondents admit that recent volatility is making them anxious about their nest egg. This anxiety is driving them to search for products that protect a portion of their retirement savings, even if they have to give up potential growth in exchange. A whopping 57% of respondents were willing to sacrifice potential gains to achieve this protection, compared with 48% in 2015.

The issue of safety is paramount for those nearing retirement, as this study shows. It found that 38% of respondents reported that if they experienced a significant market drop that caused them to lose a lot of money, they would not have time to rebuild their savings.

Volatility "Has Come Back with a Vengeance"

If Americans are more comfortable with being stuck in the throes of a highly volatile market, their resolve is likely to be tested throughout 2018. In a recent article, Money magazine proclaimed that “market volatility has come back with a vengeance.”

Market strategists look to the Chicago Board Options Exchange Volatility Index (known as VIX) for a window into a tumultuous market. The VIX gauges market fear based on options trading and shows the market's expectation of 30-day volatility. By that gauge, Money reports, “volatility returned to levels seen in the financial crisis years.”

A less complex indication of market volatility can be derived by counting the number of days in which stocks climb or fall by 1% or more. There were 25 such trading days in the first quarter of 2018 alone, more than in any full year since 2009. There were just 8 such days in all of 2017.

Geopolitical Concerns Can Fuel Volatility

From Western allies arguing amongst themselves at the G7 Summit to elections in Italy and their impact on the direction of the European Union, continued geopolitical confusion only adds fuel to the volatility flame.

Our potential trade wars with China (as well as our international allies), continue to be a potential stock market activity driver. If you have filled your tank at the gas station recently, you are feeling the effect of crude oil prices rising 50% in the last year alone. And don't forget about the matter of our country’s nuclear disarmament dance with North Korea, where much uncertainty and questions linger.

The seesaw of good news and bad news included a bright spot of 3 million new jobs that have been added under the new administration. Markets love a positive jobs report. In May, our economy added 223,000 jobs, better than economists predicted. 

Many Americans Face an Underfunded Retirement

Granted, all of these events have their effects in the short run. But there is a longer-term trend of even greater concern—most Americans are facing a retirement savings shortfall. And that's just one of many ways that people are hung up on money matters, surveys indicate.

A study by the National Institute on Retirement Security, using data from the U.S. Federal Reserve, found that Americans’ retirement savings are "dangerously low." The study pinpointed our retirement savings deficit at between $6.8 and $14 trillion. The median retirement account balance was a measly $3,000 for all working-age households and just $12,000 for households that reported they were near retirement.

Experts say that this is the result of a philosophy in America that is "bring home the bacon, spend it now and worry about it later."

Steps to Greater Retirement Security

What can you do? If you are in your 50s, take stock of your situation. You still have time to start planning well so you can retire comfortably. You will want to think of ways to preserve and protect the assets you have worked hard to build. If you are behind on your savings goals and have access to a 401(k), be sure you are making your maximum, and potentially catch-up, contributions.

Determine what income you are likely to need in retirement by building a retirement income plan. Use your current household spending numbers as a real-world guide for retirement income numbers and think about the expenses you most likely won't have in retirement.

Then add back in the ones you will, like the cost of travel to see family members, the expense of new hobbies and a desire for the finer things in life you told yourself you would be rewarded with in retirement.

Protect your nest egg from volatility now and you will have more of it to draw on when you need it most. A knowledgeable financial professional can help you identify appropriate strategies to preserve what you have built while keeping you on track with your goals.

Need Help with Formulating Your Own Rock-Solid Retirement Strategy?

While market volatility is a notable concern, it's just one of many financial risks in retirement. Ultimately, the retirement years are about much more than money, and you should be confident that you are well-prepared for curveballs that may be thrown at you.

When you think you could benefit from personal financial guidance for your retirement future, financial professionals at SafeMoney.com can assist you.

Use our "Find a Financial Professional" section to connect with someone directly. Should you need a personal referral, call us at 877.476.9723.

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