February 22, 2012

‘Retiring Isn’t About Age’: Merrill Affluent Survey

The majority of investors surveyed (59%) also believe the age at which Americans are eligible to collect Social Security should be raised

Nearly 60% of affluent Americans view the prospect of living to the very ripe old age of 100 positively, though three-quarters would approach financial planning differently if they knew today they were going to live that long, according to a the results of a Bank of America Merrill Lynch survey released Wednesday. The majority of those surveyed (59%) also believe the age at which Americans are eligible to collect Social Security should be raised. 

In terms of adjusting for longevity, affluent investors say they would continue to work at least part-time in retirement (39%), work with their financial advisor to re-evaluate savings and investment strategies (37%), invest in a lifetime income product (32%), contribute more to retirement savings (32%), buy long-term care insurance (29%) and retire closer to age 85 than 65 (25%).

Plus, only 14% of respondents over 50 cite “hitting a certain age” as the factor that would most lead them to retire. Factors more likely to lead them to retire include feeling confident that their assets will pay for the lifestyle they want (25%) and a possible health condition affecting them or a family member (18%).

“We hear from our clients that retiring isn’t about their age or a magic number, but rather an ongoing assessment of the lifestyle, goals and assets they desire for their later years,” said Andy Sieg, head of global wealth & retirement solutions for Bank of America Merrill Lynch (BAC), in a statement. “And most don’t view this life stage as a straight stretch of highway so much as a winding road that requires close attention and frequent course corrections.”

The Merrill Lynch survey, which began in 2009 and is conducted every six months, focuses on the financial priorities and concerns of Americans with $250,000 and up in investable assets; the latest results were gathered in December.

More than half (55%) say they are concerned about being able to afford the lifestyle they want in retirement. And, if given the choice, half of affluent Americans (51%) not yet retired would rather retire later than make tradeoffs to their current lifestyle.

Advisors’ Role

Nearly half (47%) of affluent Americans say that conversations with their advisor regularly go much further than general investing to focus on broader aspects of retirement.

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

  • How to financially plan for the possibility of living to be 100 (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 retirement (25%)
  • The impact of rising health care costs on retirement income (25%)
  • Making lifestyle choices today to improve long-term financial security (21%)
  • Choosing the right Medicare coverage and other health-care decisions (17%)

According to survey respondents, these types of discussions, 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 investors loyal to their financial advisor.

“The survey says that affluent investors are demanding a much broader relationship with their advisors,” said David Tyrie, head of personal wealth & retirement for Bank of America Merrill Lynch, in an interview with AdvisorOne. “We hear all the time and thus are giving our advisors the support and resources they need for technical and other contingencies, such as planning for health-care issues.”

“The survey results help guide advisors in their practice-management capabilities–in differentiating themselves in their day-to-day practices,” Tyrie explained. “We are trying to use these statistics and say, ‘Here’s what these investors are interesting in and here’s how you can go support them.’ Investors are striving to work with the right advisor to help with them with complexity” of retirement-planning issues.

Top Financial Concerns

Merrill says that for the third year in a row, survey respondents cite rising health care costs as their top financial concern (79%). One-third of respondents say they are more concerned about the financial strain associated with a significant health issue than they are about how it may compromise their quality of life. Despite these concerns, though, 62% of respondents over the age of 50 have not yet estimated what their health care costs could amount to during retirement. 

Investors surveyed believe future health care costs (26%) and life expectancy (25%) to be the most difficult unknowns when planning for future financial needs.

“Rising health care 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,” added Tyrie.

Affluent women (66%) are more concerned than men (54%) about their retirement assets lasting throughout their lifetime. They 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 vs. 25% of men).

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