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Investors Uncertain, But Saving and Budgeting More

Nearly half of affluent investors expect today’s economic uncertainty not only to continue, but also to be “more of a permanent reality,” according to the latest Merrill Lynch Affluent Insights Survey. Despite these fears, 35% of the survey’s respondents believe their financial situation will improve next year and 41% expect it to remain about the same.

Gender played a role in the level of optimism. Men were more likely to believe their financial situation will improve next year than women (43% to 28%). Similarly, among those who weren’t expecting their financial situation to improve next year, 68% of women said the ongoing market volatility would play a role, versus 54% of men.

Many affluent investors said they are taking actions to better control their finances, however. One-third of the survey’s respondents said they are living more within their means. Similarly, 32% are more vigilantly sticking to a budget. About 30% consulted their spouse more often when making financial decisions.

The shift toward being more proactive about managing long-term goals was also evident in a Fidelity Investments analysis of 401(k) plans. More new participants in 401(k) plans invested through Fidelity increased the amount they defer from their paychecks than decreased it last quarter (4.6% versus 2.8%). This was the 14th consecutive quarter that this trend existed. Fidelity did not list the average deferral rate for all participants, but did say plan participants who did not utilize auto-enrollment had an average deferral rate of 8.4%, versus 3.7% for those who utilized auto-enrollment. (Fidelity recommends saving between 10% and 15% of one’s annual salary.)

The average Fidelity 401(k) account balance also rose, reaching $75,900 at the end of the third quarter. This represents an 18% increase from the same period a year ago. A rise in the stock market aided this increase.

Source: Merrill Lynch Global Wealth Management Affluent Insights Survey, September 2012, and “Fidelity Reports Highest-Ever Average 401(k) Balance,” Fidelity Investments, November 2012.


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