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Retirement, Healthcare Continue to Concern Affluent

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Despite increasing optimism about the economy, affluent investors remain concerned about retirement savings and the rising costs of healthcare.

According to Bank of America Corp.’s Merrill Lynch Affluent Insights Quarterly survey, which was released Tuesday, affluent investors have become slightly less concerned about the economy’s impact on their ability to meet financial goals, with 49% currently expressing such concerns compared with 58% in October. But issues related to retirement and healthcare rank highest among financial concerns. Among those who identified health care as a top concern (62%), more than half (56%) reported feeling unsure of how rising costs should factor into their retirement planning, up from 40% in January.

This may help to explain why the number of survey respondents concerned about whether their assets will last throughout their lifetime rose from 53% to 61% during the last quarter.

“Clients and prospects we’ve been speaking with recently echo the findings of our latest survey,” said Sallie Krawcheck, president of Bank of America Global Wealth & Investment Management. “People are feeling better about the economy but still worry about the sustainability of the improvements and have big questions about what to do next. They want to preserve capital, minimize risk and hopefully make up some of their losses, but they’re not entirely sure where to begin. This desire for guidance bodes well for wealth managers who are willing to really listen and give clients what they need.”

The study, which is the third in a series of quarterly surveys of affluent investor concerns as they approach retirement, indicates that affluent individuals over the age of 65 appear to be working longer.

Andy Sieg, the head of retirement and philanthropic services for Bank of America Merrill Lynch, said many individuals surveyed plan to continue working, even if only part-time, “into their late-60s and 70s, pursuing dream jobs and devoting more time to charitable causes.”

Affluent Baby Boomers between the age of 51 and 64 are the most concerned about whether their assets will last through retirement (73%) and whether they will be able to live the lifestyle they had hoped to in retirement (61%.)

Forty percent of those respondents expect to retire later than they did a year ago.

Often referred to as the “sandwich generation,” more than 45% of this group said that they have had to make sacrifices to support their family, 44% of these individuals have cut back on personal luxuries, 26% are now saving less for retirement, and 19% have invited their adult-age children and/or parents to live with them to cut down on monthly expenses.

Individuals between the age of 35 and 50 have similar concerns regarding healthcare, retirement and income, but the group is also concerned with funding their children’s education (52%) and knowing how to manage a proper cash flow and liquidity strategy (31%.)

During the past year, regulators have launched a number of initiatives to increase retirement savings, but 52% of respondents think more needs to be done.

For instance, half of respondents said healthcare should be provided to all retirees, while 44% think more financial resources should be put toward Social Security.

In fact, 47% of affluent individuals between 35 and 50 assume Social Security will not play a role in their retirement, and nearly 70% are skeptical about Medicare, believing it will play little or no role in their retirement.

Nearly 65% of affluent individuals under the age of 50 that were surveyed would like to see the maximum contribution limit for IRAs and employer-sponsored retirement plans increased. Also, 44% believe more programs should be established to provide more education in the workplace about how to save for retirement.

According to the survey of 1,000 wealthy individuals nationally, which was conducted between March 3 and March 15, 44% of respondents work with a financial advisor, and 75% speak with their advisor at least quarterly, and 41% at least monthly.

The number of individuals speaking with their advisors weekly has increased from 8% to 13% over the last six months.

Approximately 63% of affluent individuals working with an advisor have been doing so for more than six years, and nearly 40% for more than 10 years. Twenty-seven percent wish they had started working with an advisor earlier.

Among the 56% of those who do not work with a financial advisor, 25% believe they would benefit from such a relationship.

“During this pivotal year, it is important that affluent investors actively examine their portfolios to take advantage of recovery-related opportunities,” said Lyle LaMothe, the head of U.S. wealth management for Merrill Lynch Wealth Management. “Whether it’s help building or adjusting investment strategies for the future, managing risk or focusing on near-term liquidity and day-to-day cash flow needs, our experienced financial advisors work closely with clients to help them minimize complexity and capitalize on opportunity.”


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