HNWs Less Optimistic about Future

Nearly half (45%) of high-net-worth consumers are “very concerned” about outliving their money in retirement, according to a survey by Phoenix, an insurance provider for high-net-worth consumers. About the same number (44%) are “very concerned” about having to modify their current lifestyle in retirement, and 34% feel as if they need to make up for lost time in saving for retirement.

Phoenix surveyed workers and retirees with $1 million or more in assets (excluding primary residence). Walter Zultowski, senior vice president of Research and Concept Development at Phoenix, noted that the percentage of the American population in that category has declined overall. A recent report from Spectrem Group said the number of millionaires fell by 27% in 2008 (see “Number of Millionaires Declined Last Year“).

Millionaires are certainly feeling less wealthy than they did last year. In fact, three-quarters of respondents to the survey reported feeling less wealthy, compared to less than half in 2008’s survey. While coffers are down, pessimism about financial security is up.

Retirement (Lack of) Confidence

The latest Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) found that, across the board, retirement confidence of workers has plummeted. The percentage of workers very confident about having enough money for a comfortable retirement decreased sharply—from a mere 27% in 2007 to less than one-in-five (18%) in 2008, the biggest one-year drop in the 18-year history of the survey (see “Retirement Confidence Plummets in EBRI Survey“).

Unsurprisingly, those workers of all net worth will show more concern about retiring securely than millionaires. But Phoenix’s survey demonstrates that it’s not just the mass affluent that are worried about outliving their savings. “It’s impacting this marketplace too,” Zultowski said today at an event sponsored by Phoenix in New York City.

The largest number of respondents (41%) listed their number one financial goal as assuring a lifestyle in retirement. A full quarter of HNW investors list not running out of money as their number one financial goal (the second most cited financial goal).

Phoenix has tracked the financial goals of the high net worth for the past 10 years. Interestingly, since 2005, the percentage of HNW consumers with the top financial goal of not running out of money in retirement has trended upward (19% in 2005 compared to 25% in 2009). Meanwhile, those with the top goal of assuring their lifestyle in retirement (rather than running out of money completely) has trended downward (47% compared with 41%).

There is some discrepancy among what retirement means: For about 64%, retirement means “not working;” but 24% define retirement as working part-time. Zultowski noted that not only have HNW consumers redefined retirement, but a big chunk of them are also putting it off. Of the respondents planning to retire in the next years, almost half are thinking or planning to retire at a later date than they originally planned, according to the survey. Slightly more than half (51%) are not changing their plans.

While HNW individuals might change the date they retire, the amount of retirement income they need has not changed much in the last several years, said Zultowski. To achieve a comfortable standard of living retirement, most respondents said they need 80% to 100% of current income (36% of respondents); or 100% of current income (29%).

Glass Half Empty

In addition to retirement concerns, the HNW group of consumers shows a drop in financial confidence across the board. Only 17% are “very optimistic” about their financial future (compared to 25% in 2008). About 28% say their wealth is “extremely” or “very secure” for the long term, compared to 41% in 2008 and 45% in 2007.

Similarly, HNW consumers are more pessimistic about their financial future. In this year’s survey, 30% of respondents were pessimistic, versus only 5% 10 years ago. “The continuing economic turmoil has stripped America’s millionaires of their confidence and sense of security; they are feeling far worse off than they did during the last economic downturn in 2003,” Zukowski said in a release of the survey results.

The survey, conducted by Harris Interactive, polled 1,735 households between January 30 and February 20.