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Retirees Are Still Looking to Grow Their Principal

By Joan Warner December 26, 2013

Thanks to the steep stock-market rise in 2013, retirees and pre-retirees feel better about investing in equities than they did 12 months ago. That’s one finding from a recent proprietary survey by Ignites Retirement Research, FA-IQ’s sister news service, of 1,000 investors aged 50 to 69 with at least $100,000 in investable assets. The research aims to uncover trends in the investing preferences, goals and habits of this demographic — many of whom watched half their retirement savings go up in smoke five years ago.

Some of that trauma appears to have healed. Nearly three-quarters (74%) of retirees and pre-retirees said they feel positive or very positive about U.S. equities, up from 62% last year. Interestingly, retirees are even more enthusiastic than pre-retirees about this asset class. When retired investors look for income, dividend-paying stocks offer a better deal than bonds, and far fewer survey respondents reported feeling positive about U.S. corporates, government bonds and money-market funds.

On the other hand, pre-retirees’ and retirees’ top priorities when making investment decisions haven’t changed since last year: Long-term financial goals and risk-appropriateness gain were again the No. 1 and No. 2 two factors they called crucial or very important (see chart). But income moved up the list, for retirees and pre-retirees alike. And 37.5% cited reliable income generation as the No. 1 reason they would add a new product to their retirement portfolios, with growth potential coming in a distant second at 19%.

Advisors with newly retired clients take note: More retirees in the survey (66%) said growing wealth is a crucial or very important financial goal than pre-retirees (51%). And, somewhat strangely, 84% of retirees named saving for retirement as a crucial or very important goal, compared with 70% of pre-retirees. The findings suggest that one psychological result of the 2008 crash is a marked reluctance for investors to shift from accumulation to distribution just because they happen to stop working a steady job.