Index of Investor Optimism, A UBS/Gallup Poll of Investor Attitudes - Investors Demonstrate Changing Views About Retirement; Optimism Reading Drops 13 Points

Investor optimism took a hit this month, dropping 13points since January to its current reading of 80, according to thelatest UBS/Gallup Index of Investor Optimism. While this is asignificant decline since January, optimism remains higher than it wasduring most of last year. The February decline is due to fallinginvestor confidence in the performance of the stock market (the DowJones Industrial Average dropped 4 percent just prior to the surveyperiod, falling from its January breach of the 11,000 barrier).Special this month is the Index's focus on retirement. Interestingly,the findings suggest that sources of retirement income are expanding,that fewer investors expect their pensions to be their major source ofretirement income and that the retirement age is slowly creepingupward.

"Attitudes about retirement savings are gradually changing as lifeexpectancy increases and investors deal with the reality of needingmultiple sources of income to last them over a longer retirementperiod," said Robin Miranda, Associate Strategist, UBS WealthManagement Research.

The survey finds that 28 percent of investors expect that whenthey retire, they will not have enough money to last them for the restof their lives. About half, 51 percent, expect to have just aboutenough, while another 20 percent say they will have more than enoughmoney.

Investors who expect a shortfall are most likely to make up thedeficit by tightening their belts and spending less during retirementthan they had hoped (65 percent are "very" likely to follow thisapproach) working longer before they actually retire (63 percent) anddoing more part-time work once they do retire (51 percent). They aremuch less likely to pursue a more aggressive investment strategy tomake up the deficit (only 29 percent) or increase the amount of moneythey save (just 31 percent). Only 18 percent are "very" likely to donothing differently.

The sources of investors' retirement income continue to expand.Fewer and fewer investors will rely primarily upon a company pensionfor retirement, or even on personal savings. More investors expect torely on part-time work, and a substantial number plan to earn money inretirement from a hobby or starting a business.

In 1998, shortly before the peak of the stock market, 61 percentof investors said they expected personal savings and additionalinvestments, such as an IRA, to be a major source of retirementincome. Today, just 41 percent site these as potentially major sourcesof retirement income.

The percentage of investors saying they will rely on companypensions has also declined in the past decade. In the late 1990s, 40percent of investors expected pensions to be a major sources ofretirement income, compared with just 29 percent today. In part, thischange reflects the tendency of businesses to offer 401K retirementpackages, rather than pensions. But there has been no significantchange in the percentage of investors citing such personal investmentplans as a major source of retirement income - today 55 percent cite a401k plan as a major source, compared with 56 percent in 2002 and 54percent in 1997.

Other major sources of retirement income include Social Security(21 percent) money from a business or hobby (19 percent) part-timework while retired (18 percent) and an inheritance (9 percent). Thepercentage relying on part-time work is double what it was in 2001 and2002.

Just over half of all investors, 51 percent, expect that aninheritance will be either a major or minor source of retirementincome. Still, just 36 percent say that leaving money to theirfamilies is an explicit part of their own investment strategy.

Twenty-three percent of investors expect to work past the normalretirement age of 65, not much different from the percentage with thatexpectation four years ago, but greater than the 15 percent in 2001who expected to work that late in life. On average, investors polledexpect to retire at age 63. Only 11 percent expect to retire by age55, down from 15 percent who held that expectation in 2002, and 24percent in 2001.

Investors' expectations for return on their portfolio haveimproved with expectations averaging 11.6 percent, up from 9.4 percentlast month. The number of investors who think now is a good time toinvest in the financial markets (62 percent) has not changedsignificantly since last month (63 percent).

These findings are part of the 95th Index of Investor Optimism,which was conducted February 1 to February 16. To track and measureIndex changes on an ongoing basis, new samplings are taken monthly.Dennis J. Jacobe, research director for Gallup, said the samplingincluded 802 investors randomly selected from across the country. Forthis study, the American investor is defined as any person who is headof a household or a spouse in any household with total savings andinvestments of $10,000 or more. Nearly 40 percent of Americanhouseholds have at least this amount in savings and investments. Thesampling error in the results is plus or minus four percentage points.

For more than 60 years, the Gallup Organization has been arecognized leader in the measurement and analysis of people'sattitudes, opinions and behavior. While best known for the GallupPoll, founded in 1935, Gallup's current activities consist largely ofproviding marketing and management research, advisory services andeducation to the world's largest corporations and institutions.

UBS is one of the world's leading financial firms, serving adiscerning global client base. As an organization, it combinesfinancial strength with an international culture that embraces change.As an integrated firm, UBS creates added value for clients by drawingon the combined resources and expertise of all its businesses.

UBS is the world's largest wealth manager, a top tier investmentbanking and securities firm, and one of the largest global assetmanagers. In Switzerland, UBS is the market leader in retail andcommercial banking.

UBS is present in all major financial centers worldwide. It hasoffices in 50 countries, with about 39% of its employees working inthe Americas, 37% in Switzerland, 16% in the rest of Europe and 8% inAsia Pacific. UBS's financial businesses employ more than 69,500people around the world. Its shares are listed on the SWX Swiss StockExchange, the New York Stock Exchange (NYSE) and the Tokyo StockExchange (TSE).

Additional information about the Index of Investor Optimism can befound at www.ubs.com/investoroptimism
UBS Index of Investor Optimism overall trend

Overall Index
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06 February 80
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06 January 93
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05 December 79
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05 November 50
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05 October 47
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05 September 34
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05 August 61
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05 July 58
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05 June 54
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05 May 50
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05 April 52
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05 March 74
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05 February 82
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05 January 76
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04 December 79
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04 November 69
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04 October 62
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04 September 74
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04 August 77
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04 July 88
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04 June 95
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04 May 71
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04 April 73
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04 March 85
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04 February 97
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04 January 108
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03 December 104
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03 November 93
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03 October 69
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03 September 54
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03 August 61
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03 July 54
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03 June 77
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03 May 42
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03 April 66
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03 March 5
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03 February 9
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03 January 38
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02 December 52
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02 November 41
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02 October 29
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02 September 60
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02 August 52
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02 July 46
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02 June 72
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02 May 90
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02 April 89
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02 March 121
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02 February 92
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02 January 115
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01 December 88
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01 November 84
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01 October 86
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01 September 50
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01 August 76
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01 July 74
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01 June 85
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01 May 90
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01 April 81
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01 March 82
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01 February 77
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01 January 96
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00 December 106
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00 November 130
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00 October 132
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00 September 147
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00 August 160
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00 July 143
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00 June 149
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00 May 155
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00 April 140
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00 March 150
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00 February 168
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00 January 178
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99 December 174
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99 November 148
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99 October 139
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99 September 160
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99 August 149
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99 July 166
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99 June 146
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99 May 163
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99 April 168
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99 March 151
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99 February 167
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98 December 141
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98 September 147
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98 June 160
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98 March 161
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97 December 151
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97 September 151
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97 June 152
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97 February 128
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96 November 125
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96 October 124
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