Even America’s millionaires are now concerned about inflation’s corrosive effect on their nest egg, according to a new report. The results of the 9th annual Phoenix Wealth Survey stand in stark contrast to a 2007 survey from The Phoenix Companies, Hartford, Conn., which found record-high levels of optimism among the country’s millionaires.
“Our survey findings weren’t surprising given what’s going on in the economy,” says Walter Zultowski, a senior vice president of research and concept development at The Phoenix Companies. “What is surprising is depth of the decline among those who reported feeling wealthier. It’s the lowest number we’ve seen in the 9 years of this survey.”
More than 1,900 people with $1 million or more in net worth (excluding their primary residence) were polled for this year’s survey by Harris Interactive. Boomers between the ages of 46 and 54 and between 55 and 64 constituted more than 4 in 10 (42%) of the respondents.
Reflecting a heightened level of concern, there was a significant drop in how people perceived their financial situation. Just 54% of respondents reported feeling wealthier in 2008, a significant decline from 81% in 2007. Only a quarter said they are “very optimistic” about their financial future, a 9-percentage-point drop from last year.
The majority (58%) also say the U.S. economy is in a downturn and the worst is yet to come.
More people appear to be scaling back their expectations for retirement. When asked to describe how much of their income would constitute a “comfortable standard of living in retirement,” 62% say less than 100% of their current income, an increase of 10 percentage points from 2007. Just one quarter say it is 100% of current income. Those figures, says Zultowski, are in line with ones from 4 years earlier, when the U.S. was coming off the last bear market.
Lowering expectations doesn’t diminish ongoing concerns, however. Forty percent of the high-net-worth individuals polled worry their assets will be depleted too quickly or they won’t be able to live comfortably on their retirement income, compared with 36% last year.
Inflation fears, as well as investment performance worries, are stoking those concerns. Half say they are worried that inflation will erode the value of their income (up significantly from 42% in 2007), and 39% fear diminished assets due to poor investment performance, an increase of 6 percentage points.
“What most concerns respondents this year are those things that can erode their retirement nest eggs, such as inflation and poor investment performance,” says Zultowski. “During the last several years, the big concern was unforeseen health care costs, which is still up there. But it didn’t jump up from last year.”
Most wealthy consumers (89%) who have a primary financial advisor report are satisfied with their advisor. More than half (56%) have been with the same advisor for 6 or more years and just 8% say they will be looking for a new financial advisor in the next 12 months.