Average life expectancy has risen dramatically during the last
century. The U.S. Census Bureau estimates that the number of
centenarians, people who live to be 100, rose from 2,300 in 1950 to
nearly 80,000 in 2010, and will exceed 600,000 by 2050. And
according to the Society of Actuaries, a 65-year-old couple now has
a 31 percent chance of at least one spouse living past the age of
95.
According to findings from the latest Merrill Lynch Affluent
Insights Survey™, announced today, the majority of affluent
Americans (58 percent) have a positive view of the prospect of
living to be 100. However, three out of four (75 percent) would
approach their money management differently if they knew today that
they were going to live that long. To financially accommodate a
longer life, they would:
- Continue to work at least part-time
during retirement (39 percent).
- Work with their financial advisor to
reevaluate their savings and investment strategies (37
percent).
- Invest in a lifetime income product,
such as an annuity (32 percent).
- Contribute more to a 401(k), IRA or
other retirement savings vehicle (32 percent).
- Purchase long-term care insurance (29
percent).
- Retire closer to age 85 than 65 (25
percent).
In light of longer life expectancies, the majority of
respondents (59 percent) also believe that the age at which
Americans are eligible to collect Social Security should be
raised.
This Merrill Lynch survey, which began in 2009 to examine the
goals, values and financial concerns of affluent Americans, also
finds that, when it comes to retirement, age is far less of a
factor today. In fact, only 14 percent of respondents over the age
of 50 cite “hitting a certain age” as the factor that would most
lead them to retire. Instead, two factors more likely to lead them
to retire include feeling confident that their assets will grant
them the lifestyle they want throughout their remaining years (25
percent), and a possible health condition (18 percent) – their own
or that of a family member.
“We hear from our clients that retiring isn’t about their age or
a magic number, but rather an ongoing assessment of the lifestyle,
goals and assets they desire for their later years,” said Andy
Sieg, head of Global Wealth and Retirement Solutions for Bank of
America Merrill Lynch. “And most don’t view this life stage as a
straight stretch of highway so much as a winding road that requires
close attention and frequent course corrections.”
Expecting to live considerably longer than their grandparents’
generation, affluent Americans find themselves in uncharted
territory. Many are uncertain about how to adequately save for
retirement and how to turn assets into sustainable income once
retired, with more than half (55 percent) concerned about being
able to afford the lifestyle they want in retirement.
“Helping individuals and families optimize their financial
resources and quality of life during retirement is not a math
problem solved solely with a calculator or single product,” said
David Tyrie, head of Personal Wealth and Retirement for Bank of
America Merrill Lynch. “Achieving greater financial security and
positive outcomes during retirement is a lifelong challenge solved
through insight, planning, shared responsibilities and an array of
solutions that can empower you to own the road, instead of the
other way around.”
Affluent prefer delayed retirement over trade-offs to their
current lifestyle
If given the choice, half of affluent Americans (51 percent) not
yet retired would rather retire later than make trade-offs to their
current lifestyle. However, when push comes to shove, and
trade-offs are needed to help ensure their assets sustain them
throughout retirement, 81 percent would make them, including a
combination of:
- Trimming day-to-day expenses (38
percent).
- Purchasing fewer personal luxuries (35
percent).
- Limiting budgets for vacations (32
percent).
- Keeping the same car longer (27
percent).
- Leaving less of an inheritance (25
percent).
- Downsizing their home (24
percent).
Among those preparing to retire in the next five years, many are
taking additional steps to ensure their assets last throughout
their lifetime, including saving more (39 percent), developing a
plan for monthly expenses and other financial needs once retired
(36 percent), consolidating assets with fewer financial
institutions (20 percent), clipping more coupons (19 percent) and
providing less financial support to their adult-age children (15
percent).
Longevity and the desire to work later in life, because they
have to or want to, is redefining the meaning of retirement. The
survey found that only one out of four (24 percent) define
retirement as never working again. The reality is that three out of
four (73 percent) respondents not yet retired view this life stage
as a second act during which they intend to work part- or
full-time. Among this group, 30 percent plans to cycle between work
and leisure after reaching the point previously thought of as
retirement.
Rising cost of health care tops list of financial concerns,
but few have a plan
For the third year in a row, survey respondents cite rising
health care costs as their top financial concern (79 percent).
One-third of respondents went so far as to say that they are more
concerned about the financial strain associated with a significant
health situation, such as a chronic illness or disability, than
they are about how it may compromise their quality of life. Despite
these concerns, 62 percent of respondents over the age of 50 have
not yet estimated what their health care costs may amount to during
retirement.
Survey respondents believe future health care costs (26 percent)
and life expectancy (25 percent) to be the most difficult unknowns
when planning for future financial needs.
“Rising health care costs must become part of a holistic
planning process that can lead to greater confidence and an
improved sense of financial security throughout one’s lifetime,”
added Tyrie.
Greater retirement concerns on Venus than Mars
On average, women today live more than five years longer than
men1. This may be one of the reasons affluent women (66 percent)
are more concerned than men (54 percent) about their retirement
assets lasting throughout their lifetime. Women surveyed are also
more concerned (76 percent) about the future of Social Security
benefits than men (59 percent), and about what the prospect of
caring for an aging parent could do to their own financial security
(37 percent of women, 25 percent of men).
Also, while many baby boomers are struggling to save for and
fund their retirement, most respondents (79 percent) believe that
Americans under the age of 35 today won’t have it any easier.
Likely to live longer and to depend less on government entitlements
and pensions as lifetime income sources, younger generations may
well have an increasingly difficult time saving for retirement
unless changes are made.
Client to Financial Advisor: How do I live well
longer?
When it comes to helping clients prepare for retirement, the
role of a financial advisor has evolved beyond asset accumulation
strategies and portfolio structuring. Nearly half (47 percent) of
affluent Americans cite that conversations with their advisor
regularly go much further than general investing to focus on
broader aspects of retirement. Financial advisors today are a
source of insight and advice around how trade-offs, health care
costs and longevity may impact retirement outcomes. Retirement
topics clients would like to discuss more often with their
financial advisor include:
- How to financially plan for the
possibility of living to be 100 years old (30 percent).
- Managing cash flow and liquidity in
retirement (29 percent).
- Balancing competing near- and long-term
financial demands (26 percent).
- How they hope to live their life during
their retirement years (25 percent).
- The impact of rising health care costs
on their retirement income (25 percent).
- Making lifestyle choices today that
will improve their long-term financial security (21 percent).
According to respondents, these deeper conversations, along with
such core qualities as understanding their current financial
situation (58 percent) as well as their goals, dreams and personal
values (51 percent) are what keep them loyal to their financial
advisor relationship.
“Many of our clients today face a new set of retirement
challenges not encountered by previous generations,” said John
Thiel, head of U.S. Wealth Management and the Private Banking and
Investment Group for Merrill Lynch Global Wealth Management.
“These findings indicate clients are looking for guidance from a
financial advisor with access to dynamic tools and resources, and a
network of retirement specialists who can help them assess their
situation, develop an appropriate retirement strategy and monitor
their progress. Our highly skilled advisors deliver this valuable
service to more and more clients every day.”
For more information about the Merrill Lynch Affluent Insights
Survey, and its complete findings, visit
www.ml.com/affluentinsights.
1Health, United States, 2010 Report by the U.S. Department of
Health & Human Services
Methodology
The survey was conducted via phone by Braun Research in December
2011 on behalf of Merrill Lynch Global Wealth Management. The
nationally representative sample consisted of 1,000 affluent
Americans (ages 18+) with investable assets in excess of $250,000.
At least 300 affluent Americans were also oversampled in five
target markets including Atlanta, Chicago, Dallas, Detroit and San
Francisco. The margin of error is +/- 3.1 percent for the national
sample and +/- 5.7 percent for the oversampled markets, with both
reported at a 95 percent confidence level.
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