Market Volatility Causing Retirement Savings Concerns

Despite reactions to extreme market volatility conditions in 2018, American workers are gaining a sense of comfort with the market, according to an Allianz Life Insurance study.

The study, conducted in April, found that 35% of the 800 employees surveyed say they are “comfortable” with the current market conditions—an increase from the 26% who said the same in 2015. However, the recent volatility in the markets is still affecting workers, with 37% admitting it is increasing their anxiety over nest eggs. If an additional major drop in the market were to cause an extreme monetary loss, 38% of respondents do not believe they could rebuild their retirement savings.

“Volatility matters, and while we see some increasing comfort with volatility, it is driving a simmering anxiety in many Americans,” says Paul Kelash, vice president of consumer insights for Allianz Life. “This anxiety about the negative effects volatility can have on their retirement savings is very real, and people are still searching for the right solutions.”

Allianz Life says there is an upsurge in the desire for savings protection. Fifty-seven percent of Americans say they would forego possible gains in exchange for a solution that protects a portion of their retirement savings, and 31% say that within five to 10 years of retirement, they would invest in a financial product that offers a balance of potential growth (up to 10%) and some level of protection (no loss of money from potential market volatility in the future). Forty-two percent of Americans are still nervous about a big market crash, and 44% fear a major recession.

This fear was not unanticipated, either. In early February, the Dow fell nearly 3,000 points, causing unusually extreme trading activity among American workers shortly thereafter. 

Due to this fear, Americans are gaining interest in financial products that provide growth potential and protection, says Kelash.

According to Allianz Life, the desire for this type of solution is even more pronounced for wealthier Americans, as 78% of respondents with more than $200,000 in investable assets believe they should devote savings towards a financial product that secures their money. Sixty-eight percent of wealthier Americans would also sacrifice potential gains for a tool that protects a portion of their retirement savings.

“As market volatility becomes a more constant part of our financial landscape, Americans are recognizing the value of options that provide both opportunity and a level of protection,” says Kelash. “Because we can’t be certain when the next major downturn will occur, it’s important that people have the ability to grow their retirement savings while still safeguarding their financial future.”