Affluent investors rethink retirement: U.S. study

By Mark Noble | January 15, 2010 | Last updated on January 15, 2010
3 min read

The worst of the financial meltdown may be over but it appears to have had a big impact on affluent investors in the U.S. According to Merrill Lynch’s ‘Insights Quarterly’, a survey of the values, financial priorities and concerns of affluent Americans, that group is rethinking and reworking their vision of retirement. The study also offers lessons learned from retirees who wished they had done things differently.

Recession changes goals

More than half (56%) of the survey respondents, who were identified to have more than $250,000 in investable assets, said they found a silver lining in how the recession altered their conceptions of retirement. Many respondents emphasized they were holding on to core values, including an enhanced focus on things that will matter most in retirement, such as family and friends (33%) and a realization that there may have to be trade-offs in retirement or a scaling back of their current lifestyle (23%). Nearly one in five respondents (19%) expect to take a more active role in managing their retirement plan.

2009 apparently spawned a number of lifestyle changes with this group, the study reports. Wealthy Americans expect to reduce or control their spending. Forty-three per cent of respondents spent less on personal luxuries last year, while 21% gave less to charities. Nearly 50% of survey respondents expect to reduce energy costs, while 38% say they are becoming more aware of their day-to-day costs of living and short-term cash flow.

Half the respondents expressed concerns about the recession’s impact on their retirement goals. Among non-retired respondents who now feel off track, 68% cited that the recession has in some way taken its toll on their finances, while 29% expect to retire later than originally planned. That number is down from 37% from Merrill Lynch’s previous survey released last October.

“The recession has caused attitudes toward retirement to evolve at an unprecedented pace,” says Andy Sieg, head of Retirement & Philanthropic Services at Bank of America Merrill Lynch. “For many, retirement is no longer a specific date at which an individual goes from working to not working. Today, the transition into retirement is tending to be more gradual and fluid. As such, an effective retirement strategy should go beyond an accumulation target and retirement income planning and take into account what is truly important to an individual or couple, as well as the challenges they may face down the road.”

Advice from affluent retirees

When asked if they could re-plan their retirement, roughly half (51%) of retired respondents indicated that they would have focused more on their “life goals” and less on “the numbers” rather than hitting a specific nest egg dollar amount. The remaining respondents (49%) indicated they would have focused more on the numbers.

The study finds retirees who wished they had focused more on their life goals indicated they would have spent more time determining how they wanted to live in their retirement years (38%) instead of basing their needs on a specific nest egg goal. One in ten respondents wished they had crafted a plan that would help them live their ideal lifestyle during these years. Additionally, 8% would have created a plan to better support their philanthropic missions.

Among those who indicated that they would have focused more on the numbers, 23% wished they had started working with a financial advisor earlier in life and 18% would have given up more luxuries in order to reach their retirement goals. Among all retired respondents, three out of 10 (31%) worked with a financial advisor when planning for retirement, however in hindsight, more than half (55%) wished they had started doing so sooner.

Retirees were asked where they would recommend those within 10 to 15 years of retirement focus their attention on. More than half of retirees (51%) advised younger generations to “build a plan around what is most important to you in retirement”. Nearly half (47%) of retirees says it’s important to have a plan to manage income, while 40% said to pay down debt. Only one in five retirees said it was necessary to be cautious with investment risks.

“Understanding our clients’ retirement-related realities and pursuits is a tremendous asset and helps us to guide them on their journey,” says Claire Huang, head of marketing for Bank of America Global Wealth Management, Global Banking and Global Markets. “Through continuously conducted surveys such as this, we have greater insight into their current priorities and concerns. These findings, along with our market research, help us stay on top of an evolving marketplace and offer better retirement advice and solutions.”


Mark Noble