U.S. inveStor pUlSe SUrvey 2014

investorsWhAT

ARe ThINkING

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What’s on the minds of investors? BlackRock is keenly interested

in what investors across the globe are thinking, how it is influencing

financial behavior today and what it can tell us about the future.

This report summarizes the results from our 2nd annual BlackRock

Global Investor Pulse survey of 27,500 people, focusing on the U.S.

findings where we interviewed a nationally representative sample

of 4,000 Americans, ages 25 to 74.

WhAT investors ARe ThINkING

W h At i n v e S t o r S A r e t h i n k i n G [ 3 ]

What WE LEaRNED FRoM yoUAlthough the global economic recovery is now well underway, Americans aren’t seeing the personal benefit from the improving landscape. As a result, they remain in a holding pattern when it comes to their finances. Our research paints a picture of Americans who are financially fatigued and lacking the confidence to move forward.

And their greatest personal financial concern is retirement. All Americans want a comfortable retirement with sufficient retirement income to last them throughout their retirement years. But wanting and saving are two different things, and there’s a significant expectation gap.

When looking at what American pre-retirees have saved for retirement compared to the annual retirement income they say they want, they only have enough to fully fund less than three years of retirement. Looking specifically at affluent pre-retirees, they only have enough to last less than seven years for a retirement that could last 20–30 years.

But there is a group of Americans who is getting it right. These highly effective Investors are twice as likely to be confident they are making the right savings and investing decisions, twice as likely to say they enjoy managing their investments, and have more than 2.5 times the retirement savings of other Americans. highly effective Investors take specific actions to help achieve their financial goals.

key Findings

} Retirement Underfunded

Given Future Income

expectations

} highly effective Investors

Do the Right Things

} Fundamental Financial

Worries exist for Many

} Overallocation to Cash

a Problem for All

7 key hABITS OF

highly effective investors1 reGUl Arly revieW FinAnceS

2 Spend time to Get inFormed

3 Seek FinAnciAl Advice

4 mAnAGe debt

5 prioritize SAvinG For retirement

6 diverSiF y portFolioS

7 pl An For biG momentS

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1 Retirement Underfunded Given Future Income expectations

Americans identify saving for retirement as their number two

priority, right behind the more general “saving money.” For affluent

Americans (those with more than $250,000 in investable assets),

saving for retirement is their most important priority.

however, only 59% of all Americans have any dedicated retirement savings either through an employer-sponsored plan or individual retirement savings, a finding that is surprisingly consistent across generations.

Among all Americans who have started saving for retirement (either on their own or through employer-sponsored plans), their current balances are very modest, especially given their expectations for retirement income. Affluent Americans stand out in their commitment to saving for retirement, with 91% already on their way. however, that doesn’t necessarily translate to retirement readiness.

not All AmericAnS Are retirement SAverShave you started to save specifically for retirement through a workplace plan or on your own?

AFFLUeNT AMeRICANS$250k+ investable assets

MILLeNNIALSAGeS 25–36

GeN XAGeS 37–49

BABy BOOMeRSAGeS 50–68

59%91%

60% 57% 59%

ALL AMeRICANS

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thE SaVINGS/FUtURE REtIREMENt INCoME DISCoNNECtAmong pre-retirees (ages 55–64), there is a huge disconnect with savings falling far short of expectations. Pre-retirees’ savings would be exhausted in less than three years in retirement; affluent pre-retirees would only be able to fund less than seven years. Looking at the disconnect from another dimension, translating current savings to future annual retirement income shows a significant gap as well.

These calculations are based on the CoRI™ Retirement Indexes by BlackRock, which can help estimate how much an investor would need to have saved today to generate each dollar of annual income in retirement. From our study, we can see how Americans are facing a serious income gap.

Pre-retirees still have time to close the gap including setting (and sticking with) additional annual savings targets, factoring in any other sources of income in retirement like Social Security, which in 2013 provided an average retiree with approximately $15,000 in annual benefits, working with an advisor to invest purposefully, and potentially delaying retirement.

the retirement income GAp

Sources: Retirement savings and desired income from Global Investor Pulse survey (July/August 2014) in median dollars for Americans ages 55–64. Estimated annual retirement income is based on the CoRI 2024 Retirement Index for a pre-retired 55 year old. CoRI estimates are as of 10/10/14, and are subject to change over time. Retirement is assumed to begin at age 65.

$96,200 TOTAL ReTIReMeNT SAvINGS $43,700 DeSIReD ANNUAL ReTIReMeNT INCOMe

INCOMe GAPeSTIMATeD INCOMe

$6,400 $37,300ALL PRe-ReTIReDAGeS 55–64

$453,900 TOTAL ReTIReMeNT SAvINGS $65,700 DeSIReD ANNUAL ReTIReMeNT INCOMe

AFFLUeNT PRe-ReTIReDAGeS 55–64

eSTIMATeD INCOMe

$30,100

$43,700DeSIReD INCOMe

$65,700DeSIReD INCOMe

$35,600INCOMe GAP

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What MakES It So haRD to SaVE?Not earning enough, high living costs and unplanned expenses are key impediments to saving for retirement. All of these concerns are felt more squarely by Americans compared to the global average. Not surprisingly, affluent Americans less often have difficulty balancing both the cost of living and saving for retirement.

FActorS limitinG AmericAnS’ Ability to SAve For retirementWhich, if any, of the following are making it hard for you to save for retirement?

I don’t earn enough

The cost of living is too high

I have unplanned expenses

I’m paying off a mortgage

47% 21%

46% 28%

33% 28%

24% 30%

ALL AMERICANS AFFLUENT AMERICANSVS

I have high credit card debt 23% 17%

deep-SeAted concernS AboUt retirement liFeStyle exiStOverall, how concerned are you that you will not be able to live comfortably in retirement?

ALL AMeRICANS AFFLUeNT AMeRICANS$250k+ investable assets

MILLeNNIALSAGeS 25–36

GeN XAGeS 37–49

BABy BOOMeRSAGeS 50–68

73%

58% 76% 79% 70%

Given what costs could be by the time we retire, it’s not surprising that 73% of Americans (58% of affluent Americans) are concerned they will not be able to live comfortably in their retirement. And more than half of Americans, regardless of wealth, are specifically concerned about outliving their savings. While Social Security was never intended to provide for a full retirement, almost two-thirds of all Americans (including 62% of affluent Americans) say that it will be critical to their ability to support themselves in retirement.

W h At i n v e S t o r S A r e t h i n k i n G [ 7 ]

Americans are squeezed by household costs, with 42% of their take-home pay spent on essential expenses, such as mortgage, rent, utilities and the like. Compared to the global average, the U.S. percentage is particularly high, leaving less for everything else and reducing our ability to save and invest.

AmericAnS Spend FAr more on eSSentiAl expenSeS thAn the reSt oF the WorldIn a typical month how much of your household’s take-home pay do you typically spend on mortgages, rent, utilities and other expenses, and how much do you save, invest and spend beyond these essentials?

DISCRETIONARY SPENDING

INVESTING/SAVING

30%42%28%

31% 32% 37%

ESSENTIALEXPENSES

WORLD

UNITED STATES

Both managing day-to-day expenses and preparing for the future is seen as a huge challenge for the majority of Americans. Overall, 75% of Americans and 56% of affluent Americans say it is “hard” to keep up with bills and save for retirement at the same time. This concern is widespread but more acutely felt by women and Americans in their middle-years (ages 45–54), those who are at the critical pre-retirement juncture and should be placing the greatest focus on saving aggressively for their retirement.

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2 highly effective Investors Do the Right Things

Not all Americans are falling short in meeting their desired

financial goals. There is one group of highly effective Investors who

are more confident, positive and in control of their financial future.

They have larger retirement savings accumulated and feel they know

how they are going to generate the income they need in retirement.

Who’S GEttING It RIGht?

Often found among the Millennial generation (48%).

More likely men (68% vs. 32% women).

More often married/living as a couple (65%)

with children (63%).

Largely employed (84%) and homeowners (81%),

with many owning their home outright.

Less likely to find it hard to keep up with bills and save for retirement

at the same time.

More positive about their financial future and the economy; optimistic about their ability to achieve their financial goals.

More likely to feel they are taking the right steps to prepare

for their retirement.

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The habits of highly effective Investors are helping them better manage their financial priorities. As a result of their financial habits, highly effective Investors are more optimistic about their financial futures, their money and investments, as well as the economy overall. Learn how other Americans are feeling.

haBItS oF hIGhLy EFFECtIVE INVEStoRS A defining characteristic of highly effective Investors is that they find a way to juggle life’s immediate costs—bills, tuition, mortgage payments—and still make an effort to save and invest for long-term goals. Unlike many Americans, they are focused on planning for future life events rather than letting things just happen.

They are active learners who invest the time to manage their money and build their financial knowledge. A majority use a financial professional to help them develop the steps they need to put together a good financial plan and the right portfolio that will support their goals.

7 hAbitS oF hiGhly eFFective inveStorS

reGUlArly revieW FinAnceS

They spend more than 3 times as much time reviewing and monitoring their savings and investments on a monthly basis.

Spend time to Get inFormed

They are more than twice as likely to regularly read financial newspapers or magazines and make the most of financial blogs and investment websites.

Seek FinAnciAl Advice

They are more than 2.5 times as likely to use financial professionals as important partners to help them make the right investment decisions.

mAnAGe debt

They are more likely to minimize debt. They are more than twice as likely to own their home outright, having paid off their mortgage.

prioritize SAvinG For retirement

They put the right emphasis on retirement, having accumulated more than 2.5 times the retirement savings of other Americans.

diverSiFy portFolioS

They don’t just fall back on cash. They are more likely to own a broader range of investments; nearly twice as likely to own stocks and close to 3 times as likely to own bonds.

plAn For biG momentS

While life happens to all of us—whether it’s getting married, buying a home, starting a family, or experiencing an unanticipated setback—highly effective Investors get ahead of the curve. They are close to twice as likely to feel strongly about financial planning and take steps to plan for the financial implications of recent life events.

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Although we are well into the U.S. economic recovery, there has

been little improvement in investor sentiment since our 2013 U.S.

Investor Pulse survey. Just over half of Americans (52%) describe

their financial future in positive terms, below the global average

of 56%. We believe this is due, in large part, to the concerns about

retirement previously discussed.

Millennials are substantially more confident (66% positive) about their financial future than other age groups, especially their parents, with less than half of Baby Boomers (45%) confident about their financial future.

3 Fundamental Financial Worries exist for Many

AmericAnS divided on hoW they Feel AboUt their FinAnciAl FUtUreOverall, which of the following words best describe how you feel about your financial future?

NEGATIVE POSITIVE

52%45%

41% 56%

Confident, Optimistic, Hopeful, Certain, Comfortable

Nervous, Depressed, Pessimistic, Frustrated, Concerned

WORLD

UNITED STATES

W h At i n v e S t o r S A r e t h i n k i n G [ 1 1 ]

In contrast with how all Americans are feeling about their financial future, affluent Americans describe their future in much more positive terms (73%) and are more confident they are making the right financial decisions (76%). While on its face, given higher savings rates, this isn’t surprising. however, given the disconnect between their savings and retirement income expectations, their confidence may be unfounded.

Americans continue to worry about the state of the U.S. economy and the high cost of living. And despite recent health care reforms, health care costs remain a significant risk factor for half of Americans.

the top 5 riSkS to yoUr FinAnciAl FUtUreWhich, if any, of the following concerns do you think pose a risk to your financial future?

ALL AMeRICANS AFFLUeNT AMeRICANSvS

hIGh COST OF LIvING

61% 48%

STATe OF The U.S. eCONOMy

55% 58%

heALTh CARe COSTS

50% 52%

ChANGeS IN INFLATION/RISING PRICING

45% 41%

ChANGeS IN SOCIAL SeCURITy

43% 36%

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Four-fifths of Americans (80%) express confidence that their

investment portfolio has the right asset allocation and investments

to help them achieve their financial goals. however, as was true in

our 2013 survey, “cash remains king” with almost two-thirds (63%)

of all savings and investments held in cash—and most of that in

traditional checking and savings accounts (51%). Total cash holdings

remain high (42%) even among affluent Americans.

But here’s the rub: Americans acknowledge they hold too much in cash. By their own estimates, cash should account for just 29% of their portfolio. Affluent Americans feel similarly (26%), but they say it’s difficult to make a change.

There is a stark contradiction between Americans’ optimism about their portfolio and its ability to deliver the growth they need —and their recognition of being overallocated to cash, which offers little return after inflation and taxes. Financial professionals can play an important role in helping investors explore better options for putting their cash to work.

4 Overallocation to Cash a Problem for All

Why Are yoU holdinG cASh?

having cash makes me feel safe38%

i am cautious with my money37%

i want to be flexible and keep my options open

34%

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What’s most surprising about the “cash is king” conundrum is that Americans intend to increase their investments in cash in the next 12 months. Overall, 55% of Americans with cash deposits and savings accounts say they will add more money to their cash accounts, far outstripping intentions to add to other investments.

In contrast to the huge amount of money that Americans are holding in cash, only 18% is invested in stocks, 6% in bonds and 5% in investment real estate.

yet Americans are optimistic about the U.S. stock market’s future performance. This should translate into a willingness to move money out of cash, but it does not.

however, only one in four Americans say they are “more interested” in investing in stocks compared to five years ago, despite steady gains in recent years.

conFidence in U.S. Stock mArket iS StronGhow do you currently feel about the U.S. stock market’s likely performance over the next 12 months?

Optimistic

PessimisticALL

AMERICANSAFFLUENT

AMERICANS

Unsure

48%

31%

21%

69%

24%

7%

Anemic intereSt in inveStinG in StockSCompared to 5 years ago, are you more or less interested in investing in stocks?

More interested 27% 39%

ALL AMERICANS AFFLUENT AMERICANSVS

Interest remains the same 36% 46%

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So What Do I Do With My Money?®

INVEStMENt aCtIoNS to CoNSIDER

BlackRock’s U.S. Investor Pulse survey reveals a number of trends.

While Americans have a broad range of positive aspirations for their

future, many are just not actively managing their saving and investing

or building the plans to get themselves on track to achieve their goals.

The highly effective Investors are different because they spend the

time to learn, solicit advice when they don’t know, and take action to

leverage opportunities that will get them closer to their goals.

This leaves the question: So what do I do with my money?

BlackRock’s survey provides insights into how you can learn from

other investors and think differently about saving, investing and

planning for your financial future. We encourage you to speak

with your financial professional about these ideas and ways to

incorporate them into your investment portfolio.

W h At i n v e S t o r S A r e t h i n k i n G [ 1 5 ]

estimate your retirement income Using blackrock’s cori retirement indexesOne of the biggest challenges investors face is knowing just how much they need to save to get the income they want during retirement.

To help address this problem, BlackRock developed the CoRI Retirement Indexes. These indexes can help estimate how much an investor would need to have saved today to generate each dollar of annual income in retirement, which can help pre-retirees see more clearly what they need to do to reach their goals. visit our online tool at blackrock.com to learn more.

REthINk yoUR BoNDSCash and bonds play an essential part in everyone’s finances, but with historically low yields and concerns about the potential for rising rates, these traditional investments may not help close the retirement income gap. Using ultra-short duration strategies to move cash off the sidelines and considering an allocation to flexible, unconstrained bond strategies can help you seek incremental yield and minimize interest rate risk.

SEEk INCoME IN DIFFERENt PLaCESToday’s environment of historically low yields and heightened volatility has led investors to ask how to find more income. Striking a prudent balance between income and risk requires widening the opportunity set, taking a flexible approach and making sure you don’t overreach.

SEEk GRoWth WIth a MEaSURE oF DoWNSIDE PRotECtIoN IN UNPREDICtaBLE MaRkEtSWith lifespans increasing and traditional bond yields largely unattractive, investors with aspirations of a long, comfortable retirement will need to consider saving for retirement as early as possible, but also think about strategies to achieve more growth. Stocks are a powerful tool to generate both growth and income; consider diversified strategies that focus on mitigating risk.

EXPaND yoUR INDEXINGInvestors use indexing as a straightforward and cost-effective approach to achieving their investment goals. Indexing provides instant diversification when accessed through an exchange traded fund (eTF). eTFs can be used as essential building blocks for the core of investor portfolios, offering a wide array of exposures to help capture opportunities.

Not FDIC Insured • May Lose Value • No Bank Guarantee

About the Survey

The BlackRock Global Investor Pulse Survey is a major research study of 27,500 interviews in 20 countries executed by Cicero Group, an independent research company.

This report focuses on the findings in the U.S. where a nationally representative sample of 4,000 Americans between the ages of 25 and 74 and either sole or dual financial decision makers for their households were interviewed using an online survey methodology. Included in the study was a group of 700 affluent Americans (those with investable assets of $250,000 or more).

Source for all data: BlackRock Investor Pulse Survey, July/August 2014.

The conclusions are intended to provide an indication of the current attitude of a sample of U.S. investors to saving and investing and should not be relied upon for any other purpose.

Investing involves risk including loss of principal amount invested. Asset allocation and diversification strategies do not ensure profits in declining markets. Fixed income risks include interest-rate and credit risk. International investing involves special risks including, but not limited to currency fluctuations, illiquidity and volatility. These risks may be heightened for investments in emerging markets. This is not intended to be relied upon as a forecast or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this paper are derived from non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy.

Visit blackrock.com, iShares.com or contact your financial professional for a prospectus or summary prospectus, which includes investment objectives, risks, fees, charges, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal. Consult with your financial professional for additional information.

The CoRI Retirement Indexes take into account current interest rates, inflation expectations, life expectancy and other factors. The CoRI Retirement Indexes do not guarantee future income or protect against loss of principal. There can be no assurance that an investment strategy based on the CoRI Retirement Indexes will be successful. Indexes are unmanaged and one cannot invest directly in an index.©2014 BlackRock, Inc. All Rights Reserved. BLACKROCK and SO WHAT DO I DO WITH MY MONEY are registered trademarks of BlackRock, Inc. All other trademarks are those of their respective owners.

Prepared by BlackRock Investments, LLC, member FINRA.

Lit. No. INVPULSE-1014R2 2009A-AC-1014 / USR-4664

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