Merrill Lynch Affluent Insights Quarterly Survey Finds New Retirement Sensibilities and Priorities Emerging Among Affluent Americans

Bank of America today announced findings from the latest Merrill Lynch Affluent Insights Quarterly, a survey of the values, financial priorities and concerns of affluent Americans and the challenges and opportunities they face. Focused largely on issues related to retirement, the second in this series of quarterly surveys reveals that many affluent Americans are rethinking their vision of retirement and offers lessons learned from retirees and what they wished they had done differently when planning for retirement.

Surprisingly, given the opportunity to do it all again, roughly half (51%) of retired respondents indicated that they would have focused more on their “life goals” and less on “the numbers” and on hitting a specific nest egg dollar amount when planning for retirement, while the remaining respondents (49%) indicated that they would have focused more on “the numbers.”

Retirees who wished they had focused more on their “life goals” indicated that they would have spent more time determining how they wanted to live in their retirement years (38%) and based their retirement income needs not just on a number that would sustain them but on one that would help them live their ideal lifestyle during these years (13%). Additionally, 8 percent 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 percent wished they had started working with a financial advisor earlier in life and 18 percent 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, though, in hindsight, more than half (55%) wished they had started doing so sooner.

“Helping our clients plan for retirement will continue to be a core focus for our business in the years ahead,” said Sallie Krawcheck, president of Bank of America Global Wealth & Investment Management. “Our experienced Financial Advisors work closely with clients to better understand their lifetime aspirations. Through this personal approach, coupled with a sophisticated portfolio of financial solutions, we strive to help clients minimize the complexity and uncertainty associated with retirement, allowing them to concentrate on what matters most.”

Impact of the Recession

In the wake of economic recession, 56 percent of respondents, whether retired or not, found some “silver lining” in how it affected – or may affect – their retirement planning and priorities. The survey finds affluent Americans returning or 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%). Others decided to take their retirement “off autopilot” and start thinking more about what they need to do in order to live the retirement they want (19%).

Reflecting on 2009, respondents also indicated various lifestyle changes made during the last 12 months. As they looked to reduce or control spending, last year more than twice as many individuals spent less on “personal luxuries” (43%) when compared to those who gave less to charities than they had in previous years (21%). Other ways affluent Americans changed the way they lived in 2009 included:

• Cutting energy costs (48%).
• Becoming more aware of day-to-day/short-term cash flow (38%).
• Vacationing less (30%) or closer to home (20%).
• Scaling back on recreational activities such as golf, skiing, tennis, etc. (29%).
• Delaying capital expenditures, e.g., home improvements or automobile expenses (16%).

More than half (52%) of non-retired respondents made some adjustments to their lifestyle last year, expressing concern about the impact of the economy on their ability to meet their financial goals (50%). Among non-retired respondents who now feel off track in terms of when they had hoped to retire, 68 percent cited that the recession has in some way taken its toll on their finances. Although 29 percent still expect to retire later than originally planned, this number is down from 37 percent in our previous survey (released Oct. 5, 2009).

“The recession has caused Americans’ attitudes toward retirement to evolve at an unprecedented pace,” said 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.”

Health Care Costs a High Concern

The survey illustrates that affluent Americans are slightly less concerned about the current impact of economic issues, with 84 percent citing high concerns compared to 95 percent in the previous survey. However, rising health care costs continued to rank among the highest financial concerns for both retired and non-retired respondents. Fifty-nine percent of retirees cited rising health care costs as a high concern and, among them, 41 percent were unsure how future health care costs should factor into their retirement plans, and 37 percent were confused by ongoing public and government debate over health care reform issues.

Similarly, 53 percent of non-retired respondents also cited health care costs as a high concern. Among them, 54 percent noted their advancing age, 44 percent the health care debate, and 39 percent the potential impact of future health care costs on their retirement plans as major drivers of their concern. Additionally, 13 percent of these respondents noted the need to simultaneously support the health care costs of their children and aging parents as a significant factor in their overall health care concerns.

Other high concerns among respondents included (T=total; R=retired; NR=non-retired):

• Ensuring retirement assets will last through lifetime (T: 53%, R: 51%, NR: 55%).
• Potential for inflation (T: 48%, R: 50%, NR: 47%).
• Afford the lifestyle I want in retirement (T: 48%, R: 41%, NR: 53%).
• Preserving inheritance for children/grandchildren (T: 37%, R: 32%, NR: 41%).
• Ability to support philanthropic priorities (T: 29%, R: 31%, NR: 28%).
• Caring for aging parents (T: 23%, R: 19%, NR: 26%).

Advice from Retirees

In this survey, retirees were asked where they would recommend those within 10 to 15 years of retirement focus their attention and where those more than 15 years from retirement should be focused:

Within 10 – 15 years of retirement:

• Build a plan around what is most important to you in retirement (51%).
• Have a plan to manage retirement income throughout retirement (47%).
• Pay down debt (40%).
• Account for unexpected costs and risks such as health care, cost of living and/or market fluctuations (38%).
• Pursue home ownership (24%).
• Be cautious of taking investment risks (21%).

More than 15 years to retirement:

• Build a plan around what is most important to you in retirement (43%).
• Pay down debt (41%).
• Have a plan to manage retirement income throughout retirement (39%).
• Account for unexpected costs and risks such as health care, cost of living and/or market fluctuations (38%).
• Work with a financial advisor if you don’t already (25%).
• Pursue home ownership (25%).

“Understanding our clients’ retirement-related realities and pursuits is a tremendous asset and helps us to guide them on their journey,” said 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.”

Affluent Insights Quarterly Methodology

Braun Research conducted the Merrill Lynch Affluent Insights Quarterly survey by phone between Dec. 1 and Dec. 16, 2009 on behalf of Merrill Lynch Global Wealth Management. Braun contacted a nationally representative sample of 1,000 affluent Americans with investable assets in excess of $250,000, and oversampled 300 affluent Americans in each of 14 target markets including Atlanta, Ga.; Boston, Mass.; Charlotte, N.C.; Chicago, Ill.; Dallas, Texas; Miami, Fla.; Minneapolis, Minn.; Phoenix, Ariz.; Philadelphia, Pa.; San Francisco, Calif.; Los Angeles, Calif.; Fairfield County, Conn. (Stamford, Greenwich and Westport); Washington, D.C.; Orange County, Calif. (Irvine, Laguna Hills and Newport Beach). The margin of error is +/- 3.1% for the national sample and +/- 5.7% for the oversample markets, with both reported at a 95% confidence level.

Bank of America

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 53 million consumer and small business relationships with 6,000 retail banking offices, more than 18,000 ATMs and award-winning online banking with more than 29 million active users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

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