Today, Bank of America Merrill Lynch released a breakthrough new
study, which revealed major gaps in retirement readiness. Among
pre-retirees, the survey discovered that half don’t have any
positive financial role models and consider finance topics too
taboo to discuss openly. Furthermore, financial decisions are the
most second-guessed of any major life decisions, and people are
more concerned about their personal economy than the overall
economy. The study also explores a vast range of lifestyle and
financial trade-offs and course corrections people would be willing
to make to help achieve a more financially secure future.
This new study, “Finances in Retirement: New Challenges, New
Solutions”, is the capstone of eight studies conducted in
partnership with Age Wave. This study concludes a
first-of-its-kind, four-year, 50,000-respondent investigation
focused on understanding the transforming nature of retirement
through seven interconnected “life priorities” – family, work,
health, home, giving, leisure and finances.
Key findings from this latest survey of more than 4,800
respondents include:
- While most Americans realize retirement
will be the biggest purchase of their lifetime, costing 2.5 times
the cost of an average home, 81 percent say they do not know how
much money they will need to fund their retirement.
- While most people say they want to live
to the age of 90, only 27 percent of pre-retirees age 50+ feel
financially prepared to fund a retirement that lasts 10 years, let
alone 20-30 years.
- Americans are saving only a fraction of
what they think they should: 5.5 percent1 vs. 25 percent of their
annual income (after taxes).
- More than half of millennials feel a
secure retirement is beyond reach, compared to 30 percent of baby
boomers who feel this way. And millennials expect 65 percent of
their retirement income to come from personal sources, including
savings and continued employment, far more than earlier
generations.
- The three biggest retirement-related
financial worries for most Americans are 1) a costly health issue
impacting them or loved ones; 2) inflation – the rising cost of
life; and 3) not having enough money to do what they would
like.
- People say the cost of basic expenses
and prioritizing paying down debt are the two biggest barriers to
saving more for retirement. And they are far more concerned about
“their” personal economy than “the” economy.
“As Americans gear up for longer retirement experiences, the
responsibility for funding these later years is landing much more
on their shoulders,” said Lorna Sabbia, head of Retirement and
Personal Wealth Solutions at Merrill Lynch. “To navigate this new
landscape, today’s retirees and future generations will need to
play a more active role, which includes closing the savings
‘intention-action’ gap, planning ahead to meet their retirement
goals and regularly course-correcting along the way.”
Bridging the intention-action gapToday’s picture of
retirement readiness shows significant room for improvement.
Americans age 50+ graded themselves a “C-minus,” on average, for
financial and savings behaviors. The survey also found the need to
both encourage new discussions and break some taboos around
sensitive but important financial topics in order to close
knowledge gaps and increase confidence:
- Low financial confidence:
Americans are most likely to second-guess decisions related to
personal finance (36 percent) - far more than work (18 percent),
health (15 percent) or their home or living situation (8
percent).
- Lacking a money role model: Half
of age 50+ pre-retirees say they do not have a positive role model
when it comes to financial planning.
- Financial jargon: Sixty-five
percent of Americans say the language of finance is confusing and
not user-friendly.
- Taboo conversations: Americans
are seven times more likely to say that talking about personal
finances is taboo than they are to say it can be discussed openly.
And while people seem very willing to discuss a wide range of
personal issues with their best friends, only 11 percent feel
comfortable discussing their personal finances with them.
- Trigger points: Among those
saving for retirement, the top triggers that got them saving were
an employer offering a retirement savings plan (46 percent) or
information about retirement benefits (26 percent), rather than
reaching a certain age.
“In order to better experience the great ‘upsides of aging’ and
the new freedoms retirement can offer, people could take steps to
better understand their finances, more openly discuss finance
topics and seek out positive role models – and that process can
start now, no matter what age you are,” said Kevin Crain, head of
Workplace Financial Solutions. “This also opens doors for employers
to play an even larger role in empowering Americans to financially
prepare for their futures.”
New choices: Money-saving trade-offs and course
correctionsAlthough most retirement preparedness studies have
focused primarily on savings patterns, this investigation uncovered
a myriad of trade-offs Americans would consider in order to improve
their financial security during retirement. As tens of millions of
boomers migrate into retirement, we’re likely to see a range of
potential course corrections to modify family spending, continue
working, downsize or relocate one’s home, barter time for services
and even new innovations in the “sharing economy” geared to
retirees. Some examples of course corrections include:
- Health: Ninety-one percent would
make healthier choices to reduce potential expenses in later life,
and the same percentage would use more generic medications and
supplies. Sixty-eight percent say they would consider purchasing
long-term care insurance.
- Work: Three-quarters would be
willing to work longer, preferably part-time, to shore up their
savings (note: only 43 percent would want to work full time); and
67 percent would be open to learning new skills to be able to work
at something different.
- Family: Eighty-four percent
would like to educate their family on ways to be more financially
independent (nine in 10 of all Americans want basic financial
education to be a standard part of high school curriculum); 70
percent would consider cutting back on support to adult children;
and only 30 percent would ask family members to provide help to
them.
- Leisure: Ninety-five percent of
retirees say they’d prefer to have more enjoyable experiences than
buy more things; 81 percent would increase use of community
recreation programs; and 70 percent would be willing to stay with
friends or family when traveling to reduce costs.
- Home: Three in four say they
would downsize their home to both lower ongoing costs and benefit
from the equity; 67 percent would be willing to move to a less
expensive location; and 47 percent would consider selling their
home and renting an apartment.
- Giving: Three-quarters would
volunteer more of their time and reduce monetary donations; 71
percent would consider leaving less to their loved ones; and 69
percent would be willing to barter their time and skills with
others in exchange for their time and skills.
- Finances: Ninety percent of
people would be willing to cut back on basic expenses and save
more; 77 percent would increase use of tax-protected retirement
accounts; two-thirds would sell belongings or real estate that they
no longer need; and three in five would adjust the timing of their
Social Security benefits.
“This study underscores that thriving in retirement requires
looking through the interconnected lenses of all major life
priorities – family, health, home, work, leisure, giving and
finances – and anticipating how you want to live, what matters most
to you, and the trade-offs you can make today to more generously
fund your future self,” said Ken Dychtwald, Ph.D., CEO and founder
of Age Wave. “Although we are all challenged to fund our longer
lives, this suite of studies has repeatedly revealed that Americans
remain quite hopeful and are willing to consider a wide range of
course corrections in order to enjoy a secure retirement.”
To download the “Finances in Retirement: New Challenges, New
Solutions” study and interactive graphics, visit
www.ml.com/retirementstudy. This report is based on a nationally
representative survey of 4,854 respondents age 25+, and is the
capstone study of a series of in-depth studies focusing on seven
life priorities, including an initial benchmark study. To access
all eight studies and additional content and resources related to
these seven life priorities, visit www.ml.com/retirementstudy.
1 Federal Reserve, 2016 November
Age WaveAge Wave is the nation’s foremost thought leader on
population aging and its profound business, social, financial,
health care, workforce, and cultural implications. Under the
leadership of Founder/CEO Dr. Ken Dychtwald, Age Wave has developed
a unique understanding of new generations of maturing consumers and
workers and their expectations, attitudes, hopes, and fears
regarding retirement. Since its inception in 1986, the firm has
provided breakthrough research, compelling presentations,
award-winning communications, education and training systems, and
results-driven marketing and consulting initiatives to over half
the Fortune 500. For more information, please visit
www.agewave.com. (Age Wave is not affiliated with Bank of America
Corporation.)
Merrill Lynch Global Wealth ManagementMerrill Lynch Global
Wealth Management is a leading provider of comprehensive wealth
management and investment services for individuals and businesses
globally. With 14,629 financial advisors and $2.1 trillion in
client balances as of December 31, 2016, it is among the largest
businesses of its kind in the world. Merrill Lynch Global Wealth
Management specializes in goals-based wealth management, including
planning for retirement, education, legacy, and other life goals
through investment, cash and credit management. Within Merrill
Lynch Global Wealth Management, the Private Banking and Investment
Group focuses on the unique and personalized needs of wealthy
individuals, families and their businesses. These clients are
served by more than 190 highly specialized private wealth advisor
teams, along with experts in areas such as investment management,
concentrated stock management and intergenerational wealth transfer
strategies. Merrill Lynch Global Wealth Management is part of Bank
of America Corporation. For more information, please visit
https://www.ml.com/financial-goals-and-priorities.html.
Bank of AmericaBank of America is one of the world's leading
financial institutions, serving individual consumers, small and
middle-market businesses and large corporations with a full range
of banking, investing, asset management and other financial and
risk management products and services. The company provides
unmatched convenience in the United States, serving approximately
46 million consumer and small business relationships with
approximately 4,600 retail financial centers, approximately 15,900
ATMs, and award-winning online banking with approximately 34
million active accounts and nearly 22 million mobile active users.
Bank of America is a global leader in wealth management, corporate
and investment banking and trading across a broad range of asset
classes, serving corporations, governments, institutions and
individuals around the world. Bank of America offers
industry-leading support to approximately 3 million small business
owners through a suite of innovative, easy-to-use online products
and services. The company serves clients through operations in all
50 states, the District of Columbia, the U.S. Virgin Islands,
Puerto Rico and more than 35 countries. Bank of America Corporation
stock (NYSE: BAC) is listed on the New York Stock Exchange.
Bank of America Merrill Lynch is a marketing name for the
Retirement Services business of Bank of America Corporation (BofA
Corp). Banking activities may be performed by wholly owned banking
affiliates of BofA Corp, including Bank of America, N.A. (BANA),
member FDIC. Certain associates are registered representatives with
Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S)
– a registered broker-dealer, member SIPC, and wholly owned
subsidiary of BofA Corp – and may assist you with investment
products and services outside of Heath Benefit Solutions.
MLPF&S does not provide any services for the Bank of America
HSA.
Investment products:
Are Not
FDIC Insured Are Not Bank Guaranteed
May Lose Value
© 2017 Bank of America Corporation. All rights reserved.
Visit the Bank of America newsroom for more Bank of America
news, and click here to register for news email alerts.
www.bankofamerica.com
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170215005147/en/
Reporters May Contact:Julia Ehrenfeld, Bank of America,
1.646.855.3267julia.ehrenfeld@bankofamerica.com
Bank of America (NYSE:BAC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Bank of America (NYSE:BAC)
Historical Stock Chart
From Apr 2023 to Apr 2024