Retirement Planning For The High-Net Worth In Search Of A New Model

The percent expecting their retirement will be sooner than what theyd planned 5 years ago has jumped by 5 percentage points. Additionally, 77% define a comfortable standard of living as 80% or greater than their current income. Over a third (35%) define this as 100% or more of their current income. The median household income reported by our high-net-worth survey respondents was $146,154.

Making Progress or Running Out of Time?

In light of these expectations, it is not surprising that the majority of the high-net-worth market (60%) indicate that assuring a comfortable standard of living during retirement is the top goal they are working on. Approximately one-third (34%) indicate they already have achieved this goal. However, if we eliminate those already retired from the analysis, we find that less than one-quarter (23%) of pre-retiree high-net-worth households indicate theyve achieved their goal of assuring a comfortable retirement. This same group reports that they plan on retiring in an average of 10.7 years.

Quo Vadis?

If it isnt already clear from the discussion above, there are several disconnects relating to the high-net-worth market and their plans relating to retirement. Number 1: This market expresses increasing concerns about retirement security, but at the same time expectations regarding early retirement and what makes for a comfortable retirement continue to remain high. Number 2: The average number of years until retirement as reported by the high-net-worth seems terribly short to accommodate the 77% who are still working on their financial goal of accumulating a nest egg that assures a comfortable retirement.

Perhaps, however, the most significant disconnect exists between the enormity of the need for retirement planning that exists in the high-net-worth market and the lack of professional help reported by consumers in this market. Specifically, of those who say they have a primary financial advisor, only 58% say this advisor is assisting them with retirement planning. However, factor in the segment reporting they currently do not have a primary financial advisor, and the result is that fewer than 4 out of 10 high-net-worth consumers (39%) report having a primary financial advisor who is helping them with retirement planning.

Events of the last decade have created a unique situation in todays high-net-worth market. Demographics and the wealth creation phenomenon of the 90s created high retirement expectations, but the bear market at the turn of the century drained some of the resources necessary to fulfill these hopes and dreams. Today, expectations remain high, and time to retirement relentlessly continues to shrink. This unique set of events is creating an unprecedented opportunity for financial advisors who recognize it and are prepared to step forward and fill the void.

is senior vice president, business and market research for The Phoenix Companies Inc., Hartford, Conn. He can be reached via e-mail at [email protected].

Reproduced from National Underwriter Edition, September 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.