Affluent Concerned with Retirement, Health Care Costs

The latest release of the Merrill Lynch Affluent Insights Quarterly survey, conducted by Braun Research, found that although affluent Americans are increasingly optimistic about the economy’s impact on their ability to meet financial goals since the beginning of the year, the number of survey respondents concerned about whether their assets will last throughout their lifetime rose from 53% to 61% during the last quarter.

Almost regardless of asset levels, the sample of 1,000 affluent Americans with investable assets in excess of $250,000 are concerned about having enough income in retirement, noted Andy Sieg, head of Retirement and Philanthropic Services, Bank of America Merrill Lynch, speaking on a call with reporters today. Also, among those who identified health care as a top concern (62%), more than half (56%) reported feeling unsure of how rising costs should factor into their retirement planning, up from 40% in January.

Generational and Gender Differences

The survey examined financial concerns by gender and found that women express more concern about nearly all financial issues than men, often 10% to 15% greater. Although both genders had the same top four concerns, women outpaced men in all worries, and men and women had a slight difference in prioritization of these concerns: rising costs of health care (70% of women, 54% of men); ensuring assets will last throughout their lifetimes (65% of women, 57% of men); being able to afford the lifestyle they want in retirement (55% of women, 46% of men); and the impact of the economy on their ability to meet financial goals (56% of women, 42% of men).

The Merrill Lynch survey found that affluent individuals over the age of 65 appear to be working longer (even if only part-time) and approaching retirement practically and altruistically—focusing most on spending more time with family and friends (67%). An interesting statistic, Sieg pointed out, is that just as many in this age group plan to dedicate time to philanthropic endeavors as those who intend to spend more time traveling during their retirement years (45% in both cases). Married couples are 10% to 15% more likely to dedicate time to philanthropic causes than singles in retirement.

Affluent Baby Boomers ages 51 to 64 are the group most concerned about whether their assets will last throughout their lifetime (73%) and whether they will be able to live the lifestyle they had hoped to in retirement (61%). In fact, 40% of survey respondents in that age range expect to retire later than they did one year ago. Health care costs are a concern for 72% of this group as well.

Of this segment, nearly one-third (31%) are supporting, in some or most ways, both their children and parents. The survey results show “clear choices are being made” by this group, Sieg said. Those being “sandwiched” are more likely to cut back on their lifestyle—45% of this group have had to make lifestyle sacrifices to support the needs of their family and 44% have significantly cut back on personal luxuries—than they are to stop saving for large expenses—26% are now saving less for retirement, and 12% have contributed less to their child’s college education.

Across all groups, 35- to 50-year-olds face the greatest struggles with balancing short-term financial priorities and concerns, such as funding their children’s education (52%) and knowing how best to manage a proper cash flow and liquidity strategy (31%). That group also expressed similar levels of longer-term concerns about health care, retirement lifestyle, and income to the Baby Boomers.

The youngest group surveyed, individuals ages 18 to 34, indicated they simply lack the financial education needed to make the best decisions. When asked what they find most challenging about retirement planning, 24% said “understanding various tax implications associated with different retirement savings vehicles, ” while nearly the same number (23%) said “knowing where to begin” was most challenging.

Working with Financial Advisers

Nearly half (44%) of affluent Americans are working with a financial adviser. Of those, 75% engage with their adviser at least quarterly, and 41% at least monthly—statistics that are relatively unchanged from the previous two quarters. However, the number of individuals speaking with their financial adviser weekly has steadily risen from 8% to 13% during the last six months.

Those are not short-term relationships, noted Sallie Krawcheck, president, Global Wealth & Investment Management. Approximately 63% of affluent Americans working with a financial adviser have been doing so for more than six years, and nearly 40% for more than 10 years. More than one-quarter (27%) wish they had started working with their financial adviser earlier, something Krawcheck said indicated that many affluent Americans believe financial planning should have started at an earlier stage in life.

Of those who don’t have a relationship with an adviser, about one-quarter of them think they would benefit from such a relationship—offering a prospecting opportunity for advisers.