HNW Show Slightly Shifting Views about Retirement

The annual survey by Phoenix, a provider of insurance solutions to HNW consumers, looks at U.S. adults with a net worth of $1 million or more, not including any debt and the value of their primary home. When it comes to retirement, that segment is traditionally  more focused on protecting their lifestyle in retirement than running out of money— but amid the depths of the recession last year Phoenix saw a greater concern about running out of money (see “Some HNW Individuals Push Back Retirement Plans”). This year those very concerned about outliving their money went down slightly to 35% from 38% in 2009. Concern about having to modify their lifestyle in retirement held steady, with 42% reporting they are very concerned, compared to 44% in 2009.

While concerns about retirement lifestyle and outliving savings remained, this year Phoenix also noted an uptick in concern about the ability to pay for health care in retirement (61%, up from 56% in 2009). Walter Zultowski, senior adviser at The Phoenix Companies, Inc., noted that some of the concern could be due to a halo effect caused by health care reform, but it could also be that the discussion around health care caused people to realize their real health-care risk in retirement.

Zultowski noted that while short-term concern about outliving savings might have subsided, respondents still seem concerned about retirement risks in general. When asked to select their retirement risk concerns, 47% selected outliving assets, up from 40% in 2009. Other risk concerns saw more responses, however, including inflation (55%, up from 50%), not being able to live comfortably (50%, up from 44%), and health care (49%, up from 42%).

“What we have going on here is that for the current time being they’re feeling a little more comfortable than they did last year but all of this has kind of sensitized them to their retirement in the future,” Zultowski told PLANADVISER. “They’ve seen what might happen to them should they see another huge downturn when they’re getting ready to retire.”

Furthermore, the results show that HNWs have slightly redefined their comfortable standard of retirement, Zultowski said. This year 62% said a comfortable standard of living in retirement would be less than 100% of current income, up from 58% the previous year. “Their expectations or views as to what would make for a comfortable standard of living in retirement has tempered a little bit,” he said.

‘Negative Wealth Effect’

While HNW consumers showed modest optimism about the economy and an improved sense of financial security, they have not returned to pre-2009 levels. The survey found that for the first time in recent years, HNW consumers experienced a “negative wealth effect,” or feeling less wealthy than they had the year before. More than half (52%) of respondents reported feeling less wealthy than last year, with only about one-quarter (26%) feeling wealthier. That’s still improved from last year, when almost three-fourths (74%) reported feeling less wealthy.

Amid the financial crisis, it seems that more HNW consumers turned to financial advisers and developed a financial plan. The percentage with a written financial plan (44%) was up from 39% in 2009—the greatest percentage ever, Zultowski noted.

More than three-fourths (79%) of respondents indicated they are receiving financial advice from an adviser on a regular basis, up from 73% last year. Loyalty to advisers is also looking brighter. Of those with a primary financial adviser, 9% reported that they plan to look for a new one in the next months, down from a record high of 13% last year.