Affluent Investors Evaluate Longevity Challenges

According to findings from the latest Merrill Lynch Affluent Insights Survey, three out of four (75%) affluent Americans would approach their money management differently if they knew today that they would live to be 100.

And many people are in, fact, living to be that old.  According to the U.S. Census Bureau, the number of people who live to be 100 rose from 2,300 in 1950 to nearly 80,000 in 2010, and will exceed 600,000 by 2050.

To financially accommodate a longer life, survey participants said they would:

  •  Continue to work at least part-time during retirement (39%);
  •  Work with their financial adviser to re-evaluate their savings and investment strategies (37%);
  •  Invest in a lifetime income product, such as an annuity (32%);
  •  Contribute more to a 401(k), IRA or other retirement savings vehicle (32%);
  •  Purchase long-term care insurance (29%); and
  •  Retire closer to age 85 than 65 (25%).


“This whole longevity challenge is making these affluent investors think about a very comprehensive solution and think longer term than they ever have before,” David Tyrie, head of Personal Wealth & Retirement for Bank of America Merrill Lynch, told PLANADVISER.  

The Merrill Lynch survey, which began in 2009 to examine the values, financial priorities and concerns of affluent Americans, also finds that when it comes to retirement, age is far less of a factor today. In fact, just 14% of respondents over the age of 50 cite “hitting a certain age” as the factor that would most lead them to retire.  Instead, two factors that are more likely to lead them to retire include feeling confident that their assets will grant them the lifestyle they want throughout their remaining years (25%), and a possible health condition (18%) of their own or of a family member.

“It’s the old world of ‘retirement at 65.’ That’s not the way it is anymore,” Tyrie said.   

Many affluent Americans are uncertain about how to adequately save for retirement and how to turn assets into sustainable income once retired, with more than half (55%) concerned about being able to afford the lifestyle they want in retirement.  In light of longer life expectancies, the majority of respondents (59%) also believe that the age at which Americans are eligible to collect Social Security should be raised.

An adviser’s ‘holistic’ role  

The role of a financial adviser has evolved beyond asset accumulation strategies and portfolio structuring and now calls for a more “holistic” approach, Tyrie said. Nearly half (47%) of affluent Americans cite that conversations with their adviser regularly go much further than general investing to focus on broader aspects of retirement. Financial advisers today are a source of insight and advice on how tradeoffs, healthcare costs and longevity may impact retirement outcomes.

“Gone are the days where an adviser can just say, ‘Hey, here’s your 401(k) plan.’ Now they must provide holistic education and product solution sets,” Tyrie said.

Retirement topics clients would like to discuss more often with their financial adviser include:

  •  How to financially plan for the possibility of living to be 100 years old (30%);
  •  Managing cash flow and liquidity in retirement (29%);
  •  Balancing competing near- and long-term financial demands (26%);
  •  How they hope to live their life during their retirement years (25%);
  •  The impact of rising health care costs on their retirement income (25%);
  •  Making lifestyle choices today that will improve their long-term financial security (21%); and
  •  Choosing the right Medicare coverage and other healthcare decisions (17%).


According to respondents, these deeper conversations—along with such core qualities as understanding their current financial situation (58%) as well as their goals, dreams and personal values (51%)—are what keep them loyal to their financial adviser relationship.

Affluent prefer delayed retirement over tradeoffs to their current lifestyle 

If given the choice, half of affluent Americans (51%) not yet retired would rather retire later than make tradeoffs to their current lifestyle.  However, when tradeoffs are needed to help ensure their assets sustain them through retirement, 81% would make them, including a combination of:

  •  Trimming day-to-day expenses (38%);
  •  Purchasing fewer personal luxuries (35%);
  •  Limiting budgets for vacations (32%);
  •  Keeping the same car longer (27%);
  •  Leaving less of an inheritance (25%); and
  •  Downsizing their home (24%).


Among those preparing to retire in the next five years, many are taking additional steps to ensure their assets last throughout their lifetime, including saving more (39%), developing a plan for monthly expenses and other financial needs once retired (36%), consolidating assets with fewer financial institutions (20%), clipping more coupons (19%) and providing less financial support to their adult-age children (15%).

Longevity and the desire to work later in life, because they have to or want to, is redefining the meaning of retirement.  The survey found that only one out of four (24%) define retirement as never working again.  The reality is that three out of four (73%) respondents not yet retired view this life stage as a second act during which they intend to work part- or full-time. Among this group, 30% plan to cycle between work and leisure after reaching that point previously thought of as retirement.


Rising cost of healthcare tops list of financial concerns 

For the third year in a row, survey respondents cite rising healthcare costs as their top financial concern (79%). One-third of respondents said they are more concerned about the financial strain associated with a significant health situation, such as a chronic illness or disability, than they are about how it may compromise their quality of life. But despite these concerns, 62% of respondents over the age of 50 have not yet estimated their healthcare costs during retirement. 

Survey respondents believe future healthcare costs (26%) and life expectancy (25%) to be the most difficult unknowns when planning for future financial needs.

“Rising healthcare costs must become part of a holistic planning process that can lead to greater confidence and an improved sense of financial security throughout one’s lifetime,” Tyrie said.

Greater retirement concerns for women 

On average, women today live more than five years longer than men. This may be one of the reasons affluent women (66%) are more concerned than men (54%) about their retirement assets lasting throughout their lifetime. Women surveyed are also more concerned (76%) about the future of Social Security benefits than men (59%), and about what the prospect of caring for an aging parent could do to their own financial security (37% of women, 25% of men).

Also, while many Baby Boomers are struggling to save for and fund their retirement, most respondents (79%) believe that Americans under the age of 35 today won’t have it any easier. Younger generations—who are likely to live longer and depend less on government entitlements and pensions as lifetime income sources—may have an increasingly difficult time saving for retirement unless changes are made.

For more information about the Merrill Lynch Affluent Insights Survey and its complete findings, visit