The Redefining of Retirement Continues

Sallie Krawcheck, President, Global Wealth & Investment Management, Lyle LaMothe, head of U.S. Wealth Management for Merrill Lynch Wealth Management, and Andy Sieg, head of Retirement & Philanthropic Services (RPS) reviewed the results of the quarterly survey on a teleconference this morning.

The overall findings indicate that not only are affluent Americans feeling more financially secure, they believe they will do even better next year. However, the 61% expecting to retire later than originally planned is a huge jump from the 29% who expected to delay retirement just as of January 2010. Seig says this is all a part of the redefinition of retirement.  He says that for Baby Boomers, “retirement” will be more like a second act, rather than completely leaving the workforce as the generation before them did.

The findings show that 41% of affluent Americans feel better off today than they did one year ago, with 37% feeling the same, and 21% feeling worse.  However, the large majority (78%) believe the coming year will bring more security.   

2010 was challenging for a good percentage affluent Americans along with the rest of the country–20% had to tap into their long-term savings/investments to take care of short-terms needs, for reasons such as covering monthly expenses (35%), paying off excess debt (27%), or compensating for a loss of income within the family (19%).   

The top financial concerns of affluent Americans include, in decreasing order of importance:

• Rising health care costs and expenses
• Ensuring retirement assets will last throughout their lifetime
• Being able to afford the lifestyle they want in retirement
• Impact of the economy on their ability to meet financial goals
• Current state of the real estate market
• Caring for an aging parent

Sixty percent of affluent Americans are concerned about the rising costs of healthcare, and 52% are concerned about the possible impacts of tax reforms in the coming year.  With the majority of affluent Americans having several real concerns about the future, it came as no surprise to Krawcheck, LaMothe, or Seig that affluent individuals are turning to their financial advisers in far greater numbers than prior to the recession.

Primarily, affluent Americans build their financial confidence by being heavily involved in their investment decisions (48%).  The next most popular source of confidence is their relationship with their financial adviser (42%).   As LaMothe sees it, affluent Americans want more of a financial “life coach,” rather than simply a financial adviser.  He said they want assistance with investments, spending, handling debt, deleveraging, cash flow, and healthcare – a package deal.  And the statistics show that the clients are finding value in this close relationship: 51% speak to their financial adviser monthly, which is up from 39% one year ago.   

A final take-away from the survey is that in the wake of the recession, affluent Americans have a “newly grounded realism,” as LaMothe put it.  Thirty-seven percent of those surveyed said they are spending less than they did last year by cutting back on luxury or recreational items, or more closely monitoring day-to-day expenses.  And they want advisers to help them with “both sides of the balance sheet,” said LaMothe.   

Advisers’ interactions with affluent Americans, specifically those nearing retirement, is going to be more about longevity planning, said Krawcheck, LaMothe, and Seig.  The focus will shift from asset growth to solutions for reliable income streams, as well as to exploring the new opportunities retirement will offer.