Past retiree stereotypes presented a simple picture. A persons retirement income would come from a workplace pension, a safe and government-backed Social Security system and interest from their life savings. Those savings usually would be invested in guaranteed, fixed-interest rate products, to preserve the principal.
You would take the income from these three sources and that would provide your retirement income. The trick was you had to live on its total and make it last your lifetime.
What a difference a generation makes. Pensions are no longer guaranteed and many have been replaced by individual 401(k) plans. Social Security is under duress, and some question whether the youngest of the 76 million Baby Boomers will benefit from that program.
Todays retiree, particularly the high net worth, has a different standard. Most financial advisors agree these men and women need to retire with between 70% and 80% of present-day income, which should come from a variety of sources. Their advisors probably have provided financial projections on what interest rate they need to earn to make those accumulated assets grow so they last 30 years–the expected length of many retirements.
As a company that specializes in the high-net-worth market, Phoenix annually surveys individuals with a net worth of $1 million, exclusive of their primary residence, to see what is on their minds. The survey is in its fourth year now, and while the high net worth were very confident in 2000, they have been punished by three years of a bear market and their attitudes reflected these tougher times. The 2003 Phoenix/Harris Interactive Wealth Survey, released June 30, found the nations wealthy are gaining confidence and are ready to re-engage in the financial markets so they can begin to grow their assets once again.
Of the 1,496 high-net-worth individuals we surveyed, 544, or 36%, are already retired. What the retirees told us shatters the previously mentioned old stereotypes once and for all.
First, these wealthy retirees are a confident group, which comes as no surprise. Sixty-eight percent said they are “somewhat” or “very optimistic” about their financial future, while 67% of the retirees believe the worst economic times “are over and we will come out of it slowly,” or “the worst is already behind.”
The retirees are comfortable with their present financial status, even after the bear market. Ninety-six percent labeled themselves either “extremely well off,” or “very comfortable/comfortable.”
They seem sure they will be able to maintain their wealth for the long term, with 94% saying they are “extremely/very or moderately” secure.
They also recognize they have achieved their wealth through cautious money management. In response to a question on how they achieved their economic status, 77% responded “by saving and investing well, and building it over the years.” That number is higher than the 64% of the full survey group.