Retirement Planning For The High Net WorthIn Search of a New Model

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One of the common myths regarding the high-net-worth market is that retirement security is not a major concern. The logic is that these households, having already achieved millionaire net worth status, have amassed enough of a nest egg to carry them through their golden years. As demonstrated by the results from the 2004 Phoenix Wealth Survey, nothing could be further from the truth.

An Increasing Concern

First, 69% of the high net worth indicate that their most important financial goal is to “assure a comfortable standard of living during retirement,” an increase of 6 percentage points from just one year ago. This result suggests that their concerns primarily revolve around protection of a lifestyle, and for the majority of the high net worth this is largely the case. However, our survey also picked up that outliving assets is a concern among a growing, and not that small, minority of this market. For example, the percent agreeing with the statement “I am very concerned about outliving my money in retirement” has grown steadily from 32% in 2001 to 39% today.

The toll on consumers retirement nest eggs by the bear market is also apparent in our trend numbers. For example, the last 2 years of the study have demonstrated a significant increase in the percentage of the high net worth who agree with the statement “I feel I need to make up for lost time in saving for retirement.” This number now stands at 33% compared with 25% in 2000.

Great Expectations Persist

In general, the high net worth expect to retire early, with a comfortable standard of living. Despite growing concerns regarding retirement security, the numbers below show the high net worths expectations regarding retirement remain high.

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 walter.zultowski@phoenixwm.com.


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.