Data & Research

Affluence Does Not Ease Retirement Concerns

Despite the fact that the majority of high-net-worth individuals say they are extremely secure with their long-term wealth, their primary financial concern is their retirement security.
Reported by Fred Schneyer
Among high-net-worth individuals, 81% of respondents to the annual wealth survey by Hartford, Connecticut-based insurer The Phoenix Companies said they feel wealthier than last year and more high-net-worth consumers generally consider their long-term wealth “extremely secure.’ Fueled by that sunny outlook, high-net-worth individuals are being more aggressive in their investing with their appetite for return on assets equaling the desire for preservation of wealth for the first time in six years, according to a news release about the survey.
But that doesn’t mean their entire outlook is sweetness and light. Respondents said long-term retirement security is their primary financial concern and a growing number believe they may never fully retire – in part because of their concerns about future health care or long-term care expenses. More high-net-worth individuals want to match or exceed their current income in order to enjoy a “comfortable retirement,’ and fewer expect ever to fully retire from work.
Even though many experts recommend people have 80% of their pre-retirement income for after they stop working, 47% of those surveyed expect to rely on 100% or more of their current income in retirement.
The Influence of Generation Xers
The other major finding of the Phoenix study was that advisers and others in the financial services sector would do well not to underemphasize the Generation Xers growing importance– as opposed to Baby Boomers who have occupied much of the industry’s attention in recent years.
According to the news release, over the eight years of the Phoenix Wealth Survey, the median age for respondents has moved downward from the upper 50s to 54, with the combined sectors of the Baby Boomer generation nearly equaling the older Silent Generation. Gen-X and younger respondents still account for the smallest slice of the high-net-worth market; however, this group is growing.
Advisers could help Gen-Xers especially in dealing with their retirement anxiety, according to the survey, because:
  • most will retire without a traditional pension plan;
  • they worry about Social Security and Medicare being around
  • they are particularly concerned about spiraling health care costs;
  • they expect to be supporting one or more aging parents;
  • they will likely be living longer than Baby Boomers and the Silent Generation;
  • they know their assets could be affected by one or more perhaps severe economic downturns before they retire.
“In short,’ Phoenix researchers said, “they view the responsibility for their financial future as being squarely, and heavily, on their shoulders.’
The demographic changes it is bringing about represent good reasons not to ignore the high-net-worth Gen-Xers. For example, this market traditionally comprises an overwhelming percentage of whites. While 78% of the high-net-worth households in 2007 were white, this is down from 1990 when nine out of 10 were Caucasian.
The diversity of the growing number of Gen-X millionaires has influenced other areas as well, according to Phoenix:
  • 11% of high-net-worth households are single households in 2007, versus 4% in 2000.
  • 7% are non-U.S. citizens in 2007, versus 4% in 2005.
  • 12% of 2007 respondents are gay, lesbian or bisexual.
Conducted by Harris Interactive during February and March 2007, the poll included online interviews with more than 1,800 individuals with a net worth of $1 million or more, excluding their primary residences.
The executive summary of the Phoenix research is here.