Merrill Survey Finds Affluent Americans Rethinking Retirement

Bank of America (BofA) said its latest Merrill Lynch survey of affluent Americans found that almost a third (29%) of non-retired respondents plan to retire later than originally planned.

However, that number is down slightly from 37% in the previous survey, taken only a quarter earlier (see “Affluent Investors Happy with Their Adviser”).

The most recent Merrill Lynch Affluent Insights Quarterly also found that, given the opportunity to do it all over again, roughly half (51%) of retired respondents said they would have focused more on their “life goals” and less on “the numbers” and hitting a specific dollar amount when planning for retirement. However, nearly the same number, 49%, said they would have focused more on “the numbers,” according to a release of the results.

The largest number of 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%), according to the survey. Others said they wished they had 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%) or that would have created a plan to better support their philanthropic missions (8%).

Among those who said they would have focused more on “the numbers,” 23% wished they had started working with a financial adviser earlier in life and 18% 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 adviser when planning for retirement. In hindsight, more than half (55%) wished they had started doing so sooner.Impact of the Recession

More than half (56%) of respondents, whether retired or not, found some ‘silver lining’ in how the recession affected, or might affect, their retirement planning and priorities, according to the Merrill Lynch Affluent Insights Quarterly. Many affluent Americans are focusing more on things that will matter most in retirement, such as family and friends (33%) and realizing that there might have to be trade-offs in retirement or a scaling back of their current lifestyle (23%). About a fifth (19%) of respondents decided to take their retirement “off autopilot” and start thinking about what they need to do in order to live the way they want in retirement.

Affluent Americans were not exempt from cutting back in the last year. Almost half (48%) of affluent Americans reported cutting energy costs. Other popular ways to scale back included cutting back on “personal luxuries” (43%), vacationing less (30%), and cutting back on recreational activities such as golf, skiing, and tennis (29%). Many surveyed affluent Americans said they became more aware of day-to-day, short-term cash flow (38%).

More than half (52%) of non-retired respondents made some adjustments to their lifestyle last year, with half (50%) expressing concern about the impact of the economy on their ability to meet their financial goals, according to the survey. Among non-retired respondents who now feel off track in terms of when they had hoped to retire, 68% said the recession has in some way taken its toll on their finances.

“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, in the release. “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 a Big Concern

Rising health care costs continued to rank among the highest financial concerns for both retired and non-retired affluent Americans, according to the survey. More than half (59%) of retirees cited rising health care costs as a high concern. Among those with high concern, 41% were unsure how future health care costs should factor into their retirement plans.

Similarly, 53% of non-retired respondents cited health care costs as a high concern, according to the survey. That concern is driven by their advancing age for more than half (54%) of them. Others cited the health care debate (44%) and the potential impact of future health care costs on their retirement plans (39%) as major drivers of their concern.

Other high concerns among respondents included: (T=total; R=retired; NR=non-retired):

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  • ensuring retirement assets will last through lifetime (total: 53%, retired: 51%, non-retired: 55%);
  • potential for inflation (T: 48%, R: 50%, NR: 47%);
  • affording the lifestyle they 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%).

“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.

On behalf of Merrill Lynch Global Wealth Management, Braun Research conducted the Merrill Lynch Affluent Insights Quarterly survey by phone between December 1 and 16 among 1,000 affluent Americans (with investable assets in excess of $250,000). The survey oversampled 300 affluent Americans in each of 14 target markets.