Affluent Insights Quarterly, a survey of the values, financial
priorities and concerns of affluent Americans and the challenges and
opportunities they face. Focused largely on issues related to
retirement, the second in this series of quarterly surveys reveals
that many affluent Americans are rethinking their vision of retirement
and offers lessons learned from retirees and what they wished they had
done differently when planning for retirement.
Surprisingly, given the opportunity to do it all again, roughly half
(51%) of retired respondents indicated that they would have focused
more on their "life goals" and less on "the numbers" and on hitting a
specific nest egg dollar amount when planning for retirement, while
the remaining respondents (49%) indicated that they would have focused
more on "the numbers."
Retirees who wished they had focused more on their "life goals"
indicated that they would have spent more time determining how they
wanted to live in their retirement years (38%) and based their
retirement income needs not just on a number that would sustain them
but on one that would help them live their ideal lifestyle during
these years (13%). Additionally, 8 percent would have created a plan
to better support their philanthropic missions. Among those who
indicated that they would have focused more on "the numbers," 23
percent wished they had started working with a financial advisor
earlier in life and 18 percent would have given up more luxuries in
order to reach their retirement goals. Among all retired respondents,
three out of 10 (31%) worked with a financial advisor when planning
for retirement, though, in hindsight, more than half (55%) wished they
had started doing so sooner.
"Helping our clients plan for retirement will continue to be a core
focus for our business in the years ahead," said Sallie Krawcheck,
president of Bank of America Global Wealth & Investment Management.
"Our experienced Financial Advisors work closely with clients to
better understand their lifetime aspirations. Through this personal
approach, coupled with a sophisticated portfolio of financial
solutions, we strive to help clients minimize the complexity and
uncertainty associated with retirement, allowing them to concentrate
on what matters most."
Impact of the Recession
In the wake of economic recession, 56 percent of respondents, whether
retired or not, found some "silver lining" in how it affected - or may
affect - their retirement planning and priorities. The survey finds
affluent Americans returning or holding on to core values, including
an enhanced focus on things that will matter most in retirement, such
as family and friends (33%), and a realization that there may have to
be trade-offs in retirement or a scaling back of their current
lifestyle (23%). Others decided to take their retirement "off
autopilot" and start thinking more about what they need to do in order
to live the retirement they want (19%).
Reflecting on 2009, respondents also indicated various lifestyle
changes made during the last 12 months. As they looked to reduce or
control spending, last year more than twice as many individuals spent
less on "personal luxuries" (43%) when compared to those who gave less
to charities than they had in previous years (21%). Other ways
affluent Americans changed the way they lived in 2009 included:
• Cutting energy costs (48%).
• Becoming more aware of day-to-day/short-term cash flow (38%).
• Vacationing less (30%) or closer to home (20%).
• Scaling back on recreational activities such as golf, skiing,
tennis, etc. (29%).
• Delaying capital expenditures, e.g., home improvements or
automobile expenses (16%).
More than half (52%) of non-retired respondents made some adjustments
to their lifestyle last year, expressing concern about the impact of
the economy on their ability to meet their financial goals (50%).
Among non-retired respondents who now feel off track in terms of when
they had hoped to retire, 68 percent cited that the recession has in
some way taken its toll on their finances. Although 29 percent still
expect to retire later than originally planned, this number is down
from 37 percent in our previous survey (released Oct. 5, 2009).
"The recession has caused Americans' attitudes toward retirement to
evolve at an unprecedented pace," said Andy Sieg, head of Retirement &
Philanthropic Services at Bank of America Merrill Lynch. "For many,
retirement is no longer a specific date at which an individual goes
from working to not working. Today, the transition into retirement is
tending to be more gradual and fluid. As such, an effective retirement
strategy should go beyond an accumulation target and retirement income
planning, and take into account what is truly important to an
individual or couple, as well as the challenges they may face down the
road."
Health Care Costs a High Concern
The survey illustrates that affluent Americans are slightly less
concerned about the current impact of economic issues, with 84 percent
citing high concerns compared to 95 percent in the previous survey.
However, rising health care costs continued to rank among the highest
financial concerns for both retired and non-retired respondents. Fifty-
nine percent of retirees cited rising health care costs as a high
concern and, among them, 41 percent were unsure how future health care
costs should factor into their retirement plans, and 37 percent were
confused by ongoing public and government debate over health care
reform issues.
Similarly, 53 percent of non-retired respondents also cited health
care costs as a high concern. Among them, 54 percent noted their
advancing age, 44 percent the health care debate, and 39 percent the
potential impact of future health care costs on their retirement plans
as major drivers of their concern. Additionally, 13 percent of these
respondents noted the need to simultaneously support the health care
costs of their children and aging parents as a significant factor in
their overall health care concerns.
Other high concerns among respondents included (T=total; R=retired;
NR=non-retired):
• Ensuring retirement assets will last through lifetime (T: 53%, R:
51%, NR: 55%).
• Potential for inflation (T: 48%, R: 50%, NR: 47%).
• Afford the lifestyle I want in retirement (T: 48%, R: 41%, NR: 53%).
• Preserving inheritance for children/grandchildren (T: 37%, R: 32%,
NR: 41%).
• Ability to support philanthropic priorities (T: 29%, R: 31%, NR:
28%).
• Caring for aging parents (T: 23%, R: 19%, NR: 26%).
Advice from Retirees
In this survey, retirees were asked where they would recommend those
within 10 to 15 years of retirement focus their attention and where
those more than 15 years from retirement should be focused:
Within 10 - 15 years of retirement:
• Build a plan around what is most important to you in retirement
(51%).
• Have a plan to manage retirement income throughout retirement (47%).
• Pay down debt (40%).
• Account for unexpected costs and risks such as health care, cost of
living and/or market fluctuations (38%).
• Pursue home ownership (24%).
• Be cautious of taking investment risks (21%).
More than 15 years to retirement:
• Build a plan around what is most important to you in retirement
(43%).
• Pay down debt (41%).
• Have a plan to manage retirement income throughout retirement (39%).
• Account for unexpected costs and risks such as health care, cost of
living and/or market fluctuations (38%).
• Work with a financial advisor if you don't already (25%).
• Pursue home ownership (25%).
"Understanding our clients' retirement-related realities and pursuits
is a tremendous asset and helps us to guide them on their journey,"
said Claire Huang, head of marketing for Bank of America Global Wealth
Management, Global Banking and Global Markets. "Through continuously
conducted surveys such as this, we have greater insight into their
current priorities and concerns. These findings, along with our market
research, help us stay on top of an evolving marketplace and offer
better retirement advice and solutions."
Affluent Insights Quarterly Methodology
Braun Research conducted the Merrill Lynch Affluent Insights Quarterly
survey by phone between Dec. 1 and Dec. 16, 2009 on behalf of Merrill
Lynch Global Wealth Management. Braun contacted a nationally
representative sample of 1,000 affluent Americans with investable
assets in excess of $250,000, and oversampled 300 affluent Americans
in each of 14 target markets including Atlanta, Ga.; Boston, Mass.;
Charlotte, N.C.; Chicago, Ill.; Dallas, Texas; Miami, Fla.;
Minneapolis, Minn.; Phoenix, Ariz.; Philadelphia, Pa.; San Francisco,
Calif.; Los Angeles, Calif.; Fairfield County, Conn. (Stamford,
Greenwich and Westport); Washington, D.C.; Orange County, Calif.
(Irvine, Laguna Hills and Newport Beach). The margin of error is +/-
3.1% for the national sample and +/- 5.7% for the oversample markets,
with both reported at a 95% confidence level.
Bank of America
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