retire later than they planned a year ago, according to the latest
Merrill Edge Report. This shows a 36 percent increase from January
2011. The report, released today by Bank of America, is a semi-annual
quantitative and qualitative study of the financial concerns and
priorities of the mass affluent (consumers with $50,000-$250,000 in
investable assets).
"While the economy is showing signs of a turnaround, our data
indicates the outlook among the mass affluent is not quite as
positive," says Dean Athanasia, Preferred and Small Business executive
at Bank of America. "In spite of their increased efforts to get on
track, this group is pushing back their retirement in greater numbers
than we've seen before."
Balancing short- and long-term finances
Balancing their short- and long-term finances continues to be one of
the greatest challenges for the mass affluent. The data shows an
increase among those who admit to tapping into their long-term savings
or investments to meet short-term financial needs (34 percent) than
previously seen in November 2011 (27 percent). Additional findings
include:
• Long-term finances pose greatest concern: The greatest financial
concerns among the mass affluent revolve around long-term issues,
including the rising cost of health care (89 percent), ensuring
retirement assets last throughout their lifetime (83 percent), and
being able to afford the lifestyle they want in retirement (80 percent).
• Issues take precedence over candidate: While the mass affluent are
concerned with the upcoming presidential election (71 percent), they
show greater concern with the issues, such as health care legislation
(80 percent), the future of Social Security benefits (77 percent) and
the U.S. government's budget deficit (77 percent).
• Parents paying more for child's education: Fifty-six percent of
mass affluent parents have paid or expect to pay more to send their
first child to college than they had expected when the child was first
born. When asked why, those who currently have a child in college or
that has graduated, 64 percent say the college or university was more
expensive, while 32 percent want to keep their child out of debt.
• Focusing on financial management: The mass affluent plan to focus
on financial management tasks in the next six months more so than seen
in the Fall Merrill Edge Report, such as: budgeting (85 percent), up
from 67 percent in November; balancing short- and long-term finances
(71 percent), up from 55 percent; and saving for retirement (68
percent), up from 49 percent. In addition to these efforts, 77 percent
of respondents note mobile banking has helped improve how well they
manage their finances.
As one qualitative respondent acknowledges, "I just created a monthly
budget, so I will be focusing on that in the next six months as a way
to avoid overspending. Hopefully, I will be able to start putting away
some money in savings again."
Making sacrifices to get on track
As getting back on track is a high priority for mass affluent
Americans, many are willing to make short-term sacrifices in order to
get their finances in better shape. Some of the methods this group
will utilize in order to meet financial obligations include cutting
back on entertainment and personal luxuries (61 percent), trimming day-
to-day expenses (56 percent) and keeping the same car longer than
they'd like to (49 percent).
"The mass affluent are taking more steps now than we saw just six
months ago to improve their finances, but balancing their budget for
today and saving for retirement continues to be their number one
struggle," says Alok Prasad, Merrill Edge executive at Bank of
America. "We're heartened to see so many in this group making
additional strides, like cutting back on unnecessary purchases and
taking on more DIY projects, to make those goals a reality. For most,
starting the process is the hardest part, and this group has taken
that first, crucial step."
In addition, signaling a commitment to their savings efforts, 70
percent of mass affluent Americans say they took on home improvement
projects in the last year, such as plumbing, painting, and home
cleaning, that they would normally hire someone else to do. Younger
members of the mass affluent were more likely to embark on these home
improvement projects than their older counterparts, as 84 percent of
18- to 34-year-olds took on a project, compared to 77 percent of 35-
to 50-year-olds, 70 percent of 51- to 64-year-olds and 60 percent of
those 65 and older.
Generation Y proves to be "Generation Worry"
Mass affluent aged 18-34 are much more worried about their financial
future than older generations, but are less likely to take as many
steps to get back on track. Interestingly, however, this group is also
most likely to manage their investments on their own (63 percent).
"The Merrill Edge Report shows that there are significant differences
between the generations, with Gen Y particularly concerned with their
financial future," said Athanasia. "For Gen Y, this is their first
investing experience, and the downturned economy has had a significant
impact on their outlook and approach to risk. The data shows that Gen
Y is proving to be 'Generation Worry' and we'll see these concerns
take their toll as they approach other life milestones like paying for
college and retirement."
While the long-term poses the greatest concern for the mass affluent
overall, Gen Y is worried about both the long- and the short-term
equally. Seventy-nine percent of Gen Yers express apprehension about
caring for an aging parent or adult child compared to 49 percent
overall. In the short-term, 92 percent of younger mass affluent say
financially supporting their family is a concern in contrast to 61
percent overall.
The data also indicates this age group is most likely to tap into
their long-term savings to pay for short-term expenses (41 percent).
Yet, they are also less willing to make changes to meet their
financial goals such as cutting back on entertainment and personal
luxuries (57 percent) and keeping the same car longer (48 percent). As
a result, 71 percent of Gen Y already expects to retire later than
planned--a stark difference from those aged 35-50 (59 percent) and
51-64 (60 percent).
For a complete, in-depth look at the mass affluent, read the entire
Merrill Edge Report. Additional topics covered in the report include
the level of financial responsibility mass affluent parents take for
their adult children, paying for college and weddings, lifestyle trade-
offs made to save money, important financial lessons they teach their
children, and whether they believe their children will achieve greater
financial success.
Merrill Edge Report Methodology
Ketchum Global Research & Analytics and Braun Research conducted the
Bank of America Merrill Edge Report survey by phone between Feb. 13
and Feb. 29, 2012 on behalf of Bank of America. Braun contacted a
nationally representative sample of 1,000 Americans in the United
States with investable assets between $50,000 and $249,999, and
oversampled 300 mass affluent in San Francisco and Los Angeles. The
margin of error is +/- 3.1 percent for the national sample and +/- 5.7
percent for the oversample markets, with both reported at a 95 percent
confidence level.
To help inform the Merrill Edge Report, Communispace conducted a
series of qualitative studies including interactive conversations,
surveys, and other dynamic and exploratory activities with its
proprietary online community of 300 mass affluent consumers.
Bank of America
Bank of America is one of the world's largest financial institutions,
serving individual consumers, small- and middle-market businesses and
large corporations with a full range of banking, investing, asset
management and other financial and risk management products and
services. The company provides unmatched convenience in the United
States, serving approximately 57 million consumer and small business
relationships with approximately 5,700 retail banking offices and
approximately 17,250 ATMs and award-winning online banking with 30
million active users. Bank of America is among the world's leading
wealth management companies and is a global leader in corporate and
investment banking and trading across a broad range of asset classes,
serving corporations, governments, institutions and individuals around
the world. Bank of America offers industry-leading support to
approximately 4 million small business owners through a suite of
innovative, easy-to-use online products and services. The company
serves customers through operations in more than 40 countries. Bank of
America Corporation stock (NYSE: BAC) is a component of the Dow Jones
Industrial Average and is listed on the New York Stock Exchange.
